UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~December 3031, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 000-55789

BANTEC, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		30-0967943
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

37 Main Street, Sparta NJ 07871		07424
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (203) 220-2296

195 Paterson Ave, Little Falls NJ 07424

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~March 3012, ~~2023~~2024, there were 610,~~994~~276,~~378~~063 shares of the registrant’s common stock issued and outstanding.

BANTEC, INC.

Form 10-Q

~~June~~December 3031, 2023

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets - As of June 30, 2023 (unaudited) and September 30, 2022	1
	Condensed Consolidated Balance Sheets - As of December 31, 2023 (unaudited) and September 30, 2023	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2023 and 2022 (unaudited)	2
	Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2023 and 2022 (unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended June 30, 2023 and 2022 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended December 31, 2023 and 2022 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2023 and 2022 (unaudited)	4
	Condensed Notes to Unaudited Consolidated Financial Statements	65
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3027
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3632
Item 4.	Controls and Procedures	3632
	PART II - OTHER INFORMATION	3733
Item 1.	Legal Proceedings	3733
Item 1A.	Risk Factors	3834
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3834
Item 3.	Defaults Upon Senior Securities	3834
Item 4.	Mine Safety Disclosures	3834
Item 5.	Other Information	3834
Item 6.	Exhibits	3935
Signatures		4036

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BANTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2023			September 30, 2022
	December 31, 2023			September 30, 2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	43101,~~772~~232		$	~~186~~35,~~386~~443
Accounts receivable		268,180			419,951
Accounts receivable, net		291,408			138,609
Inventory		55132,~~123~~762			92178,~~917~~056
Prepaid expenses and other current assets		~~34,527~~-			415,~~663~~000
TOTAL CURRENT ASSETS		~~401~~525,~~602~~402			~~703~~367,~~917~~108
Property and equipment, net		12,~~461~~885			1,~~461~~542
Right of use asset		~~140~~116,~~561~~973			33127,~~568~~276
TOTAL ASSETS	$	~~543~~645,~~624~~260		$	~~738~~495,~~946~~926
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	2,~~667~~337,~~897~~385		$	2,~~730~~215,~~309~~246
Accrued expenses and interest		63,~~257~~833,~~978~~588			53,~~094~~530,~~394~~406
Convertible notes, net of debt discount and premiums		~~585~~452,~~467~~820			7386,~~422,326~~180
Line of credit		2047,~~000~~500			-35,000
Note payable – seller		834,000			~~837~~834,000
Current portion notes and loans payable – net of discounts		523,876			217,897
Current portion notes and loans payable and other advances – net of discounts		923,840			863,852
Notes payable – related party		7132,~~151,790~~270			13105,~~537~~062
Mandatorily redeemable Preferred Stock Series C - $1.50 stated value, 1,000,000 shares designated and authorized, 224,000 issued and outstanding at June 30, 2023		336,000			-
Mandatorily redeemable Preferred Stock Series C - $1.50 stated value, 1,000,000 shares designated and authorized, 224,000 and 224,000 issued and outstanding at December 31, 2023 and September 30, 2023, respectively		343,147			340,572
Settlement payable		57,448			154,562
Lease liability - current portion		43,630			41,946
Lease liability - current portion		40,311			34,475
TOTAL CURRENT LIABILITIES		8,948,180			8,352,264
TOTAL CURRENT LIABILITIES		18,474,767			16,504,500
LONG-TERM LIABILITIES:
Lease liability - long-term portion		~~100~~74,~~250~~307			-85,880
Notes and loans payable – net of current portion		150,000			127,539
Note payable including accrued interest – related party - long-term portion		8,744,201			8,700,254
TOTAL LONG-TERM LIABILITIES		250,250			127,539
Notes and loans payable – net of current portion		150,000			150,000
TOTAL LIABILITIES	$	18,725,017		$	16,632,039
TOTAL LONG-TERM LIABILITIES		8,968,508			8,936,134
Temporary Equity – Convertible Preferred Stock Series B - $1.50 stated value, 1,000,000 shares designated and authorized, 224,000 and 448,000 issued and outstanding at June 30, 2023 and September 30, 2022, respectively	$	461,064		$	685,440
TOTAL LIABILITIES	$	17,916,688		$	17,288,398
Commitments and Contingencies (See Note 15)
Temporary Equity – Convertible Preferred Stock Series B - $1.50 stated value, 1,000,000 shares designated and authorized, 205,650 and 208,500 issued and outstanding at December 31, 2023 and September 30, 2023, respectively		481,530			463,962
Commitments and Contingencies (See Note 13)
STOCKHOLDERS’ DEFICIT:
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, Series A preferred stock – no par value, 250 shares designated, issued and outstanding at June 30, 2023 and September 30, 2022, respectively	$	-		$	-
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, Series A preferred stock – 250 shares designated, issued and outstanding at December 31, 2023 and September 30, 2023, respectively	$	-		$	-
Common stock - $0.0001 par value,12,000,000,000 shares authorized, 6,994,378 and 4,407,321 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively		699			441
Common stock - $0.0001 par value,12,000,000,000 shares authorized, 10,239,681 and 9,306,954 shares issued and outstanding at December 31, 2023 and September 30, 2023, respectively		1,023			930
Additional paid-in capital		1920,~~242~~577,~~756~~919			1920,~~051~~598,~~212~~156
Accumulated deficit		(3738,~~885~~331,~~912~~900	)		(3537,~~630~~855,~~186~~520	)
TOTAL STOCKHOLDERS’ DEFICIT		(1817,~~642~~752,~~457~~958	)		(1617,~~578~~256,~~533~~434	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	~~543~~645,~~624~~260		$	~~738~~495,~~946~~926

The accompanying ~~unaudited~~ condensed consolidated notes are an integral part of these ~~unaudited~~ condensed consolidated financial statements.

BANTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended June 30,						Nine months ended June 30,
	For the Three Months Ended December 31,
	2023			2022			~~2023~~			~~2022~~
Sales	$	~~590~~955,~~333~~734		$	~~750~~606,~~756~~166		$	~~1,819,622~~		$	~~1,522,781~~
Cost of Goods Sold		~~489~~808,~~822~~187			~~629~~511,~~023~~216			~~1,515,984~~			~~1,258,376~~
Gross Profit		~~100~~147,~~511~~547			~~121~~94,~~733~~950			~~303,638~~			~~264,405~~
OPERATING EXPENSES
Selling, general, and administrative expenses		~~397~~454,~~360~~785			~~477~~514,~~310~~290			~~1,393,133~~			~~1,679,135~~
TOTAL OPERATING EXPENSES		~~397~~454,~~360~~785			~~477~~514,~~310~~290			~~1,393,133~~			~~1,679,135~~
LOSS FROM OPERATIONS		(~~296~~307,~~849~~238	)		(~~355~~419,~~577~~340	)		~~(1,089,495~~	)		~~(1,414,730~~	)
OTHER INCOME (EXPENSE)
Interest and financing costs		(~~346~~169,~~534~~142	)		(~~240~~362,~~715~~335	)		~~(1,166,231~~	)		~~(844,426~~	)
Gain (loss) on change in fair market value of derivative		-			(20,811	)		-			(8,710	)
TOTAL OTHER EXPENSE, NET		(169,142	)		(362,335	)
Gains on debt extinguishment, net of prepayment penalty		-			159,846			-			234,933
LOSS BEFORE TAXES		(476,380	)		(781,675	)
TOTAL OTHER EXPENSE, NET		(346,534	)		(101,680	)		(1,166,231	)		(618,203	)
Provision for Income tax		-			-
LOSS BEFORE TAXES		(643,383	)		(457,257	)		(2,255,726	)		(2,032,933	)
NET LOSS	$	(476,380	)	$	(781,675	)
Provision for Income tax		-			-			-			-
Dividends Attributable to Series B and C Preferred Stock		(25,274	)		(36,960	)
NET LOSS	$	(643,383	)	$	(457,257	)	$	(2,255,726	)	$	(2,032,933	)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(501,654	)	$	(818,635	)
Dividends Attributable to Series B Preferred Stock		(34,931	)		-			(111,623	)		-
BASIC AND DILUTED NET LOSS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS	$	(0.05	)	$	(0.15	)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(678,314	)	$	(457,257	)	$	(2,367,349	)	$	(2,032,933	)
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		9,542,698			5,327,269
BASIC AND DILUTED NET LOSS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS	$	(0.10	)	$	(0.12	)	$	(0.38	)	$	(0.68	)
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		6,993,995			3,761,575			6,281,211			3,003,634

The accompanying ~~unaudited~~ condensed consolidated notes are an integral part of these ~~unaudited~~ condensed consolidated financial statements.

BANTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~JUNE~~DECEMBER 3031, 2023 AND 2022

(Unaudited)

	Series A Preferred Stock				Common Stock				Additional						Total
	Series A
	Preferred Stock				Common Stock				Additional						Total
	No. of Shares		Value		No. of Shares		Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficit
Balance at September 30, 2021		250	$	-		2,470,511	$	247	$	18,160,515		$	(32,956,840	)	$	(14,796,078	)
Balance at September 30, 2022		250	$	-		4,407,321	$	441	$	19,051,212		$	(35,630,186	)	$	(16,578,533	)
Shares issued for cash		-		-		~~100~~496,~~000~~667		1049		~~249~~99,~~990~~284			-			~~250~~99,~~000~~333
Shares issued for conversion of notes and reclassification of debt premiums		-		-		122,850		12		185,838			-			185,850
Shares issued for conversion of notes and accrued interest and reclassification of debt premiums		-		-		960,120		96		102,501			-			102,597
Share-based compensation		-		-		-		-		34,934			-			34,934
Preferred Stock Series B dividend		-		-		-		-		(36,960	)		-			(36,960	)
Net loss for the three months ended December 31, 2021		-		-		-		-		-			(852,972	)		(852,972	)
Net loss for the three months ended December 31, 2022		-		-		-		-		-			(781,675	)		(781,675	)
Balance at December 31, 2021		250		-		2,693,361		269		18,631,277			(33,809,812	)		(15,178,266	)
Balance at December 31, 2022		250	$	-		5,864,108	$	586	$	19,216,037		$	(36,411,861	)	$	(17,195,238	)
Shares issued for cash		-		-		540,980		54		324,535			-			324,589
Shares issued for conversion of notes and reclassification of debt premiums		-		-		237,476		23		164,779			-			164,802
Share-based compensation		-		-		-		-		34,174			-			34,174
Net loss for the three months ended March 31, 2022		-		-		-		-		-			(722,704	)		(722,704	)
Balance at March 31, 2022		250		-		3,471,817		346		19,154,765			(34,532,516	)		(15,377,405	)
Shares issued for cash		-		-		208,333		21		124,979			-			125,000
Shares issued for conversion of notes and reclassification of debt premiums		-		-		292,855		30		121,379			-			121,409
Net loss for the three months ended June 30, 2022		-		-		-		-		-			(457,257	)		(457,257	)
Balance at June 30, 2022		250	$	-		3,973,005	$	397	$	19,401,123		$	(34,989,773	)	$	(15,588,253	)

	Series A
	Preferred Stock				Common Stock				Additional						Total
	No. of Shares		Value		No. of Shares		Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficit

Balance at September 30, 2023		250	$	-		9,306,954	$	930	$	20,598,156		$	(37,855,520	)	$	(17,256,434	)

Preferred Stock Series B and C dividend		-		-		-		-		(25,274	)		-			(25,274	)

Shares issued for conversion of Series B preferred shares and dividends		-		-		932,727		93		5,037			-			5,130

Net loss for the three months ended December 31, 2023		-		-		-		-		-			(476,380	)		(476,380	)

Balance at December 31, 2023		250	$	-		10,239,681	$	1,023	$	20,577,919		$	(38,331,900	)	$	(17,752,958	)

The accompanying condensed consolidated notes are an integral part of these condensed consolidated financial statements.

	Series A
	Preferred Stock				Common Stock				Additional						Total
	No. of Shares		Value		No. of Shares		Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficit
Balance at September 30, 2022		250	$	-		4,407,321	$	441	$	19,051,212		$	(35,630,186	)	$	(16,578,533	)
Shares issued for cash		-		-		496,667		49		99,284			-			99,333
Shares issued for conversion of notes and reclassification of debt premiums		-		-		960,120		96		102,501			-			102,597
Preferred Stock Series B dividend		-		-		-		-		(36,960	)		-			(36,960	)
Net loss for the three months ended December 31, 2022		-		-		-		-		-			(781,675	)		(781,675	)
Balance at December 31, 2022		250		-		5,864,108		586		19,216,037			(36,411,861	)		(17,195,238	)
Shares issued for conversion of notes and reclassification of debt premiums		-		-		1,129,887		113		101,382			-			101,495
Preferred Stock Series B dividend		-		-		-		-		(39,732	)		-			(39,732	)
Net loss for the three months ended March 31, 2023		-		-		-		-		-			(830,668	)		(830,668	)
Balance at March 31, 2023		250		-		6,993,995		699		19,277,687			(37,242,529	)		(17,964,143	)
Preferred Stock Series B dividend		-		-		-		-		(34,931	)		-			(34,931	)
Fractional shares issued from reverse split		-		-		383		-		-			-			-
Net loss for the three months ended June 30, 2023		-		-		-		-		-			(643,383	)		(643,383	)
Balance at June 30, 2023		250	$	-		6,994,378	$	699	$	19,242,756		$	(37,885,912	)	$	(18,642,457	)

The accompanying unaudited condensed consolidated notes are an integral part of these unaudited condensed consolidated financial statements.

BANTEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended June 30,
	For the Three Months Ended December 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2476,~~255,726~~380	)	$	(2781,~~032,933~~675	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Amortization of debt discounts		~~276~~34,~~972~~197			6591,~~753~~009
Accretion of premium on convertible notes		~~156~~24,~~000~~110			~~193~~57,~~557~~000
Depreciation and intangibles amortization		-			6,698
Bad debt recovery		(2,011	)		-
Share-based compensation expense		-			69,108
Depreciation expense		215			-
Share issued for conversion fees		~~18,704~~-			39,~~295~~885
Fee notes issued		156,000			135,000
Fee notes issued to service providers		6,000			57,000
(Gain) on debt extinguishment		-			(259,215	)
Non-cash rent expense		414			(340	)
(Gain) Loss on derivative, change in fair market value		-			8,710
Non-cash rent expense		-			4
Changes in Assets and Liabilities:
Accounts receivable		~~151~~(150,~~771~~788	)		~~(153~~303,~~380~~409	)
Inventory		3745,~~794~~293			~~(41,216~~545	)
Prepaid expenses and other assets		~~(29~~15,~~864~~000	)		~~24,219~~-
Right of use lease asset		(907	)		-
Accounts payable and accrued expenses		475,815			144,664
Accounts payable and accrued expenses		1,106,561			739,894
Settlement payable		-			(15,000	)
Settlement payable		(97,114	)		-
NET CASH USED IN OPERATING ACTIVITIES		(28,135	)		(133,503	)
NET CASH USED IN OPERATING ACTIVITIES		(479,809	)		(1,240,506	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(1,558	)		-
NET CASH USED IN INVESTING ACTIVITIES		(1,558	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares		~~99,333~~-			~~699~~99,~~589~~333
Proceeds from line of credit		2012,~~000~~500			-
Net proceeds from notes payable		118,250			-
Net proceeds from loans and notes payable and other advances		172,000			-
Repayments of notes payable		(26,042	)		-
Repayments of loans and notes payable		(151,226	)		(40,741	)
Net proceeds from convertible notes payable		-35,000			~~101,250~~-
Repayments of convertible notes		-			(122,766	)
Net proceeds from notes payable, related party		34,783			24,000
Repayments of promissory notes, MFA		(40,741	)		-
Repayments on notes payable, related party		(7,575	)		(37,537	)
Net proceeds from notes payable, related party		245,062			125,000
Repayments on note payable - seller		-			(3,000	)
Repayments on notes payable, related party		(75,667	)		(76,745	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		95,482			42,055
Repayments on note payable - seller		(3,000	)		(27,000	)
NET INCREASE (DECREASE) IN CASH		65,789			(91,448	)
Repayments of line of credit		-			(4,885	)
CASH AT BEGINNING OF PERIOD		35,443			186,386
Repayments of factoring notes		-			(196,764	)
CASH AT END OF PERIOD	$	101,232		$	94,938
NET CASH PROVIDED BY FINANCING ACTIVITIES		337,195			497,679
NET DECREASE IN CASH		(142,614	)		(742,827	)
CASH AT BEGINNING OF PERIOD		186,386			985,953
CASH AT END OF PERIOD	$	43,772		$	243,126
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Cash paid for:
Interest	$	263,~~067~~798		$	2616,~~767~~164
Income Tax	$	-		$	-
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Issuance of common stock for conversion of convertible notes and accrued interest	$	~~95,388~~-		$	~~305~~47,~~286~~712
Reclassification of debt premium upon conversion of convertible debt	$	90,000		$	163,480
Issuance of common stock for conversion of Series B preferred stock and dividends	$	5,130		$	-
Debt discount	$	38,000		$	7,500
Reclassification of debt premium upon conversion of convertible debt	$	-		$	45,000
Right-of-use asset and lease liability pursuant to ASC 842	$	140,561		$	-
Debt discount	$	54,400		$	-
Value of Series C preferred stock in connection with an Exchange Agreement	$	336,000		$	-
Dividends on convertible preferred stock	$	25,274		$	-
Purchase of convertible note by related party	$	5,747,872		$	-
Transfer of debt premium upon purchase by related party	$	1,220,986		$	-

The accompanying ~~unaudited~~ condensed consolidated notes are an integral part of these ~~unaudited~~ condensed consolidated financial statements.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS

Bantec, Inc. is a company providing products and services (“Bantec” or the “Company”), targeting the U.S. Government, state governments, municipalities, hospitals, universities, manufacturers and other building owners. Bantec provides product procurement, distribution, and logistics services through its wholly-owned subsidiary, Howco Distributing Co. (“Howco”) to the U.S. Department of Defense and Defense Logistics Agency. The Company established Bantec Sanitizing, LLC in fiscal 2021, which offers sanitizing products and equipment through its online store - – bantec.store. The Company has operations based in Sparta, New Jersey and Vancouver, Washington. Howco operates in Vancouver, Washington and all other operations are in Sparta, New Jersey. The Company continues to seek strategic acquisitions and partnerships that would offer it an opportunity to grow sales and profit.

On July 11, 2023, the Company filed a certificate of amendment to its certificate of incorporation, as amended, to effect a one-for-one thousand (1:1,000) Reverse Stock Split (the “Reverse Stock Split”). Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN

Basis of Presentation and Principles of Consolidation

The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The accompanying consolidated financial statements include the accounts of Bantec Inc. and its wholly-owned subsidiaries, Drone USA, LLC, Bantec Construction, LLC, Bantec Sanitizing, LLC, Bantec Logistics LLC and Howco. Bantec Construction, LLC, Bantec Logistics LLC and Bantec Sanitizing, LLC are in start-up stages with minor revenues and cash expenditures. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements in accordance with GAAP have been omitted. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the ~~nine~~three months ended ~~June~~December 3031, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, ~~2023~~2024. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended September 30, ~~2022~~2023 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on February ~~January 12~~5, ~~2023~~2024. The consolidated balance sheet as of September 30, ~~2022~~2023 contained herein has been derived from the audited consolidated financial statements as of September 30, ~~2022~~2023 but does not include all disclosures required by GAAP.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the ~~nine~~three months ended ~~June 30~~December 31, 2023, the Company has incurred a net loss of $2476,~~255,726~~ 380 and used cash in operations of $~~479~~28,~~809~~135. The working capital deficit, stockholders’ deficit and accumulated deficit was $188,~~073~~422,~~165~~778, $1817,~~642~~752,~~457~~958 and $3738,~~885~~331,~~912~~900, respectively, at ~~June~~December 3031, 2023. On September 6, 2019, the Company received a default notice on its payment obligations under the senior secured credit facility agreement which was previously in default (see Note 98). The Company also defaulted on its Note Payable – Seller in September 2017 and has since defaulted on other promissory notes. As of ~~June~~December 3031, 2023, the Company has received demands for payment of past due amounts from several consultants and service providers. It is the management’s opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon the management’s ability to further implement its business plan and raise additional capital as needed from the sales of stock or debt. The Company has continued to implement cost-cutting measures and restructuring or setting up payment plans with vendors and service providers and plans to raise equity through a private placement, and restructure or repay its obligations. The accompanying consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. However, additional funding may not be available to the Company on acceptable terms, or at all. Any failure to raise capital as and when needed could have a negative impact on the Company’s ability to pursue its business plans and strategies, and the Company would likely be forced to delay, reduce, or terminate some or all of its activities, all of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for bad debt on accounts receivable, reserves on inventory, valuation of intangible assets for impairment analysis, valuation of the lease liability and related right-of-use asset, valuation of stock-based compensation, valuation of redeemable preferred stock, valuation of derivative liabilities, and the valuation allowance on deferred tax assets.

Fair Value Measurements

The Company follows the FASB Fair Value Measurements standard, as it applies to its financial instruments. This standard defines fair value, outlines a framework for measuring fair value, and details the required disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The standard establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. Level 1 inputs include quoted market prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data. The standard requires the utilization of the lowest possible level of input to determine fair value and carrying amounts of current liabilities approximate fair value due to their short-term nature.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

The Company’s non-financial assets, such as ROU assets, and property and equipment, are adjusted to fair value only when an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs.

Cash and Cash Equivalents

Cash equivalents consist of liquid investments with maturities of three months or less at the time of purchase. There are no cash equivalents at the balance sheet dates.

~~Accounts Receivable~~6

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

Accounts Receivable

Trade receivables are recorded at net realizable value consisting of the carrying amount less the allowance for credit losses, as needed. Factors used to establish an allowance include the credit quality of the customer and whether the balance is significant. The Company may also use the direct write-off method to account for uncollectible accounts that are not received. Using the direct write-off method, trade receivable balances are written off to bad debt expense when an account balance is deemed to be uncollectible. The Company maintains an allowance for credit losses primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company maintains an allowance under Accounting Standards Codification (“ASC”) 326 based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions. As of December 31, 2023 and September 30, 2023, the allowance for credit losses was $27,472 and $29,472, respectively.

Inventory

Inventory consists of finished goods, which are purchased directly from manufacturers. The Company utilizes a just-in-time type of inventory system where products are ordered from the vendor only when the Company has received sales order from its customers. Inventory is stated at the lower of cost and net realizable value on a first-in, first-out basis.

Property & Equipment

Property and equipment are stated at cost and depreciated over their estimated useful lives. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The ~~assets are fully operational drones used as demonstration units and each unit exceeds management’s threshold for capitalization of $2,000. The~~ Company depreciates these demonstration units over a period of 3 years. NoDepreciation ~~depreciation~~expense was ~~recognized~~$215 ~~during~~and $0 for the ~~nine~~three months ended ~~June~~December 3031, 2023~~, as the related equipment was depreciated~~ toand ~~salvageable value as of September 30~~2022, ~~2021~~respectively. ~~Management believes that the salvageable value of $1,461 is an adequate representation of the value of the demonstration drones at June 30, 2023.~~

Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment is determined by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their ultimate disposition. In instances where impairment is determined to exist, the Company writes down the asset to its fair value based on the present value of estimated future cash flows.

Deferred Financing Costs

All unamortized deferred financing costs related to the Company’s borrowings are presented in the consolidated balance sheets as a direct deduction from the related debt. Amortization of these costs is reported as interest and financing costs included in the consolidated statement of operations.

Revenue Recognition

The Company follows Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers, which has a five-step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied.

The Company sells a variety of products to government entities. The purchase order received specifies each item and its manufacturer; the Company only needs to fulfill the performance obligation by shipping the specified items. No other performance obligations exist under the terms of the contracts. The Company recognizes revenue for the agreed upon sales price when the product is shipped to the customer, which satisfies the performance obligation.7

The Company through its subsidiary Howco enters into contracts to package products for a third-party company servicing the same government customer base. The contracts are based on the job lot as shipped to Howco for packaging. The customer is billed upon completion each job lot at which time revenue is recognized.

The Company sells drones and related products manufactured by third parties to various parties, primarily local government entities. Contracts for drone related products and services sales will be evaluated using the five-step process outline above. There have been no material sales for drone products or other services for which full compliance with performance obligations has not been met. Upon significant sales for drone products, the Company will disaggregate sales by these lines of business and within the lines of business to the extent that the product or service has different revenue recognition characteristics.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

The Company ~~began~~sells ~~sales~~a variety of ~~sanitizing~~ products to government entities. The purchase order received specifies each item and ~~services~~its ~~during~~manufacturer; the Company ~~year~~only ~~ended~~needs ~~September~~to ~~30,~~fulfill ~~2022~~the performance obligation by shipping the specified items. ~~Revenue~~No ~~for~~other ~~this~~performance ~~line~~obligations exist under the terms of ~~business~~the iscontracts. ~~recognized~~The Company recognizes revenue for the agreed upon ~~shipment~~sales ~~and~~price ~~delivery~~when ofthe ~~training~~product is shipped to the customer, ~~services~~which ~~(as~~satisfies ~~applicable)~~the performance obligation.

The Company began sales of sanitizing products and services during the fiscal year 2022. Revenue for this line of business is recognized upon shipment and delivery of training services (as applicable).

Stock-based compensation

Stock-based compensation is accounted for based on on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the ~~financial~~ financial statements of the cost of employee and director services along with non-employee services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company utilizes the Black-Sholes option pricing model and uses the simplified method to determine expected term because of lack of sufficient exercise history. Additionally, effective October 1, 2016, the Company adopted the Accounting Standards Update No. 2016-09 (“ASU 2016-09”), Improvements to Employee Share-Based Payment Accounting. Among other changes, ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. The Company has elected to recognize forfeitures as they occur and the cumulative impact of this change did not have any effect on the Company’s consolidated financial statements and related disclosures.

As of October 1, 2018, the Company has early adopted ASU 2018-7 Compensation-Stock Compensation which conforms the accounting for non-employees to the accounting treatment for employees. The new standard replaces using a fair value as of each reporting date with use of the calculated fair value as of the grant date. The implementation of the standard provides for the use of the fair market value as of the adoption date, rather than using the value as of the original grant date. Therefore, the values calculated and reported at September 30, 2018 become a proxy for the grant date value. The Company utilizes the Black-Sholes option pricing model and uses the simplified method to determine expected term because of lack of sufficient exercise history. There was no cumulative effect on the adoption date.

Shipping and Handling Costs

The Company has included freight-out as a component of cost of sales, which amounted to $3910,~~382~~763 and $4512,~~316~~920 for the ~~nine~~three months ended ~~June 30~~December 31, 2023 and 2022, respectively.

Convertible Notes with Fixed Rate Conversion Options

The Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note date with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”.

~~Derivative Liabilities~~8

The Company has certain financial instruments that are derivatives or contain embedded derivatives. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

Derivative Liabilities

Lease Accounting

InThe ~~February~~Company ~~2016,~~follows ~~the FASB issued~~ ASU No. 2016-02, Leases, which requires lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases ~~under the prior guidance (ASC Topic 840)~~. Under the ~~new~~ guidance, codified as ASC Topic 842, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. ~~The~~ASC ~~new~~842 ~~guidance further~~ requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense generally is flat (straight-line) throughout the life of the lease. For finance leases, periodic expense declines over the life of the lease. The new standard, as amended, provides an option for entities to use the cumulative-effect transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2020. The adoption of ASC Topic 842 did not have a material impact on the Company’s consolidated financial statements.

In 2020, the Company’s subsidiary renewed the lease for the warehouse and office facility in Vancouver, Washington through May 30, 2023, and accounted for it under ASC 842. The Company signed the seventh amendment to the lease on May 2, 2023 extending the lease end date to May 31, 2026 with two additional option years. The corporate office is an annual arrangement which provides for a single office in a shared office environment and is exempt from ASC 842 treatment. The Company recognized a lease liability of $140,561 and the related right-of-use asset for the same amount in fiscal 2023 and will amortize both over the life of the lease.

Income Taxes

The Company’s current provision for income taxes is based upon its estimated taxable income in each of the jurisdictions in which it operates, after considering the impact on taxable income of temporary differences resulting from different treatment of items for tax and financial reporting purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and any operating loss or tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible. Should management determine that it is more likely than not that some portion of the deferred tax assets will not be realized, a valuation allowance against the deferred tax assets would be established in the period such determination was made. The Company follows the accounting for uncertainty in income taxes guidance, which clarifies the accounting and disclosures for uncertainty in income taxes recognized in the Company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company currently has no federal or state tax examinations in progress. As of June 30, 2023, the Company’s tax returns for the tax years 2022, 2021 and 2020 remain subject to audit, primarily by the Internal Revenue Service.9

The Company did not have material unrecognized tax benefits as of June 30, 2023 and does not expect this to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of the provision for income taxes.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

The Company currently has no federal or state tax examinations in progress. As of December 31, 2023, the Company’s tax returns for the tax years 2023, 2022, 2021 and 2020 remain subject to audit, primarily by the Internal Revenue Service.

The Company did not have material unrecognized tax benefits as of December 31, 2023 and does not expect this to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of the provision for income taxes.

Net Loss Per Share

Basic loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution. It should be noted that contractually the limitations on the third-party notes (and the related warrants) limit the number of shares converted to either 4.99% or 9.99% of the then outstanding shares. The Company’s CEO and Chairman of the Board of Directors holds all issued and outstanding shares of Series A Preferred Stock, which confers upon him a majority vote in all Company matters including authorization of additional shares of common stock or reverse stock split. As of ~~June~~December 3031, 2023 and 2022, potentially dilutive securities consisted of the following:

	June 30, 2023		June 30, 2022
	December 31, 2023		December 31, 2022
Stock options		16		16
Warrants		2,240,000		~~399~~2,~~257~~240,000
Series B Preferred Stock		~~922~~321,~~128~~020,000		-6,720,000
Third party convertible debt		1176,~~108~~172,~~244,329~~911		18208,~~643~~587,~~854~~952
Total		2499,~~032~~432,~~612,345~~927		19217,~~043~~547,~~127~~968

Segment Reporting

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. For the ~~nine~~three months ended ~~June~~December 3031, 2023, the Company had three operating segments. Howco ~~generated~~ ~~99.78~~generated 100% of the consolidated sales which are primarily from department of defense. ~~Drone LLC generated less than 0.22% of sales primarily due to state and municipal government purchases of drones and accessories.~~ Bantec Sanitizing Inc. had no contribution to consolidated sales of its sanitizing products for the ~~nine~~three months ended ~~June~~December 3031, 2023. Howco had 8799% of the consolidated tangible assets, Drone ~~had no allocated assets~~ and Bantec Sanitizing Inc. had 4%no ofallocated ~~consolidated~~ assets and the parent company had 91% of the consolidated tangible assets as of ~~June~~December 3031, 2023 and additionally, there are no formal cost allocations to Howco or the other subsidiaries.

Management decisions about allocation of working capital and other assets are based on sales, inventory and operating costs, with no formal processes in place.

Recent Accounting Pronouncements

The Company has reviewed the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. We have carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective for annual periods beginning after December 15, 2023 for smaller reporting companies, and interim periods within those reporting periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those reporting periods. The Company is currently assessing the impact the new guidance will have on its condensed consolidated financial statements.10

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Unaudited)

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective for annual periods beginning after December 15, 2023 for smaller reporting companies, and interim periods within those reporting periods. This adoption did not have a material effect to the Company.

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. This adoption did not have a material effect to the Company.

The Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

NOTE 3 - ACCOUNTS RECEIVABLE, NET

The Company’s accounts receivable at December 31, 2023 and September 30, 2023 was as follow:

	December 31, 2023			September 30, 2023
Accounts receivable	$	318,880		$	168,081
Reserve for doubtful accounts		(27,472	)		(29,472	)
	$	291,408		$	138,609

Bad debt expense (recovery) was $(2,011) and $0 for the three months ended December 31, 2023 and 2022.

NOTE 4 - INVENTORY

At December 31, 2023 and September 30, 2023, inventory consisted of finished goods and was valued at $132,762 and $178,056, respectively. No inventory reserve was deemed necessary at December 31, 2023 or September 30, 2023.

NOTE 5 - LINE OF CREDIT - BANK

The Company has a revolving line of credit with a financial institution, which balance is due on demand and principal payments are due monthly at 1/60 ^th of the outstanding principal balance. This revolving line of credit is in the amount of $50,000 and is personally guaranteed by the Company’s Chief Executive Officer (“CEO”). The line bears interest at a fluctuating rate equal to the prime rate plus 4.25%, which at December 31, 2023 and September 30, 2023 was 12.75% for both periods. As of December 31, 2023 and September 30, 2023, respectively, the balance of the line of credit was $47,500 and $35,000, with $2,500, available at December 31, 2023.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

NOTE 36 - ~~ACCOUNTS~~NOTE ~~RECEIVABLE~~PAYABLE – SELLER

~~The~~In connection with the acquisition of Howco in September 2016, the Company’s ~~accounts~~issued ~~receivable~~a note payable in the amount of $900,000 to the sellers of Howco. The note matured on September 9, 2017 and bears interest at ~~June~~5.50% per annum. The note requires payment of unpaid principal 30and interest upon maturity. The note is secured by all assets of Howco and subordinated to the Senior Secured Credit Facility (see Note 8). The note is currently in default and the default interest rate is 8% per annum. At December 31, 2023 and September 30, ~~2022~~2023, ~~was~~the principal asand ~~follow:~~accrued interest on this note amounted to $834,000, $495,243 and $834,000, $477,093, respectively.

	June 30, 2023		September 30, 2022
Accounts receivable	$	268,180	$	419,951
Reserve for doubtful accounts		-		-
	$	268,180	$	419,951

NOTE 7 - PROMISSORY NOTES PAYABLE – RELATED PARTY OFFICER AND HIS AFFILIATES

~~Bad~~The outstanding ~~debt~~balance ~~expense~~of ~~was~~notes $0issued ~~for~~to the ~~nine~~Company’s ~~months~~chief ~~ended~~executive ~~June~~officer 30and his affiliates consisted of the following at December 31, 2023 and ~~2022.~~ September 30, 2023:

NOTE 4 - INVENTORY

	December 31, 2023			September 30, 2023
Principal	$	8,876,471		$	8,805,316
Less: Current portion		(132,270	)		(105,062	)
Long term portion (including accrued interest – long term)	$	8,744,201		$	8,700,254

~~At June 30, 2023 and September 30, 2022, inventory~~Promissory ~~consisted~~Notes ofPayable ~~finished~~– ~~goods~~Current ~~and was valued at $55,123 and $92,917, respectively. No inventory reserve was deemed necessary at June 30, 2023 or September 30, 2022.~~portion

~~NOTE~~On January 51, -2023, ~~LINE~~Bantec, OFInc., ~~CREDIT~~Bantec Sanitizing LLC and Howco each executed line of credit agreements with an entity controlled by the -Company’s ~~BANK~~CEO. Each agreement has the same terms: advances up to $100,000, maturity is one year, a ten percent advance fee and daily interest at 0.07% (approximately 26% annually) on the net balance due. The Company will charge the advance fees to interest expense.

~~The Company has a revolving line of credit with~~For ~~a financial institution, which balance is due on demand and principal payments are due monthly at 1/60 th of~~ the ~~outstanding principal~~three ~~balance.~~months ~~This~~ended ~~revolving~~December ~~line of credit is in the amount of $50~~31,~~000~~ ~~and is personally guaranteed by the Company’s Chief Executive Officer (“CEO”). The line bears interest at a fluctuating rate equal to the prime rate plus 4.25%, which at June 30,~~ 2023 and September 30, 2022 was 12.5% and 10.5%, respectively. As of June 30, 2023 and September 30, 2022, respectively, the balance of the line of credit was $20,000 and $0, with $30,000, available at June 30, 2023. :

~~NOTE~~(i) 6Bantec, -Inc. ~~SETTLEMENTS~~ borrowed $34,783 and repaid $7,575, leaving an outstanding balance of $91,950.

On(ii) ~~July~~Howco ~~20,~~has ~~2018,~~an ~~the~~outstanding ~~Company~~balance ~~entered~~of ~~into a settlement agreement with a collection agent for American Express relating to~~ $~~127~~40,~~056~~320 ~~of past due charges. The agreement provided~~ for ~~initial~~both ~~payment of~~periods ~~$12,706,~~as ~~monthly payments~~ of ~~$6,500~~December ~~and final payment on January 27~~31, ~~2020~~2023 ~~of $3,850. Under the terms of the agreement, this debt was in default. On June 27, 2022, the Company entered into an agreement for the balance~~ and ~~the~~September ~~other losses were $7,042 for collection fees. Under the agreement established $5,000 per month is being paid by the Company. The amount due at June~~ 30, 2023. ~~and~~Howco ~~September~~was ~~30,~~making ~~2022, was~~weekly $0payments ~~and~~of $343,~~892, respectively~~250.

~~During the year ended September 30, 2022, $119,670~~Promissory ~~was~~Notes ~~accrued~~Payable in– ~~recognition~~Long of an appeals court ruling that certain obligations be settled in cash (see Note 15). On February 14, 2023, the former CFO received a judgement of $130,400 relating to compensation. The Company paid $2,222 as of March 31, 2023. On May 3, 2023, the Company and the former CFO executed an agreement to settle the judgement amount plus potential obligations for legal fees incurred by the former CFO for a total amount of $90,000 to be paid in three equal installments beginning May 4, 2023, June 3, 2023 and July 3, 2023. The May 2023 and June 2023 payments of $60,000 were made. As of the date of filing this Form 10-Q, all payments have been made and the matter has been concluded.term

~~The~~On April ~~total~~12, ~~amounts~~2023, ~~due~~the atreceiver ~~June~~for 30TCA Global Credit Master Fund, ~~2023~~LP (“TCA”) sold and ~~September 30~~assigned to Ekimnel Strategies, ~~2022~~LLC, a ~~was~~Delaware ~~$57~~limited liability company (“Ekimnel”),~~448~~ and Ekimnel purchased and assumed, all of TCA’s rights and ~~$154~~obligations as a lender under that certain Senior Secured Credit Facility Agreement (the “Agreement”) (see Note 8). Ekimnel is a company controlled by Michael Bannon,~~562,~~ ~~respectively~~the Company’s Chief Executive Officer.

On August 12, 2023, the Company, as the Borrower, and the Company’s subsidiaries: Drone USA, LLC and Howco Distributing Co., as Corporate Guarantors, and Michael Bannon, as a Validity Guarantor (collectively, “Credit Parties”), entered into an Amendment (the “Amendment”) to the Agreement with Ekimnel, as the Lender, pursuant to which the Company issued the Second Replacement Promissory Note (the “Note”) to Ekimnel in the principal amount of $8,676,957. The Note was issued in substitution for and to supersede the First Replacement Promissory Convertible Note A and the First Replacement Promissory Convertible Note B, previously issued by the Company, as amended from time to time (collectively “Replacement Notes”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Amendment or the Agreement.

Pursuant to the Amendment, the Lender and the Credit Parties:

(i)

combined and consolidated both the Replacement Notes into the Note;

(ii)

extended the Maturity Date of the Note to August 12, 2047;

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~NOTE~~(iii) 7lowered ~~- NOTE~~the ~~PAYABLE~~interest –rate ~~SELLER~~on the Note to 2.0% per year, with (a) the principal and interest payments starting on August 12, 2026, and (ii) for the period commencing on August 12, 2023 and ending on August 11, 2026, interest due on the Note being added to the outstanding principal amount of the Note;

In(iv) ~~connection~~removed ~~with~~ the ~~acquisition~~Lender’s ofright ~~Howco~~to ~~in September~~convert ~~2016,~~ the Company’s ~~issued~~obligations aunder ~~note payable in~~ the ~~amount~~Note ofinto ~~$900,000~~shares ~~to the sellers~~ of ~~Howco.~~common ~~The~~stock ~~note matured on September 9, 2017 and bears interest at 5.50% per annum. The note requires payment~~ of ~~unpaid principal and interest upon maturity. The note is secured by all assets of Howco and subordinated to~~ the ~~Senior~~Company; ~~Secured Credit Facility discussed below. The note is currently in default~~ and the default interest rate is 8% per annum. At June 30, 2023 and September 30, 2022, the principal and accrued interest on this note amounted to $834,000, $458,946 and $837,000, and $409,063, respectively (see Note 15).

~~NOTE~~(v) 8made -certain ~~PROMISSORY~~conforming ~~NOTES~~changes ~~PAYABLE~~to –the ~~RELATED~~terms ~~PARTY~~of ~~OFFICER AND~~the ~~HIS AFFILIATES~~Agreement.

~~The~~Due ~~outstanding~~to ~~balance~~the ofrelated ~~convertible~~party ~~and~~nature ~~other~~of the transaction, ~~notes~~the ~~issued~~Company recorded a total of $1,363,100 to additional paid in capital in fiscal year 2023 as a result of the ~~Company’s~~debt ~~chief~~extinguishment ~~executive~~in connection ~~officer~~with ~~and~~the ~~his~~assumption ~~affiliates~~of ~~consisted~~the Senior Secured Debt by Ekimnel, a related party, and removal of the ~~following~~put atpremium ~~June~~on 30the convertible debt. At December 31, 2023 and September 30, ~~2022:~~2023, the principal amount – long-term on this note amounted to $8,744,201 and $8,700,254, respectively, which included accrued interest.

	June 30, 2023		September 30, 2022
Principal	$	5,930,804	$	13,537
Premiums		1,220,986		-
Short term	$	7,151,790	$	13,527

NOTE 8 - CONVERTIBLE NOTES PAYABLE AND ADVISORY FEE LIABILITIES

~~Promissory~~The ~~Notes~~convertible ~~Payable~~debt balances consisted of the following at December 31, 2023 and September 30, 2023:

On January 1, 2023, Bantec, Inc., Bantec Sanitizing LLC and Howco each executed line of credit agreements with an entity controlled by the Company’s CEO. Each agreement has the same terms: advances up to $100,000, maturity is one year, a ten percent advance fee and daily interest at 0.07% (approximately 26% annually) on the net balance due. The Company will charge the advance fees to interest expense.

	December 31,			September 30,
	2023			2023
Principal	$	257,019		$	211,019
Premiums		203,943			179,833
Less: debt discount		(8,142	)		(4,672	)
	$	452,820		$	386,180

AsFor the ofthree ~~June~~months 30ended December 31, 2023: and 2022, amortization of debt discount on the above convertible notes amounted to $1,530 and $0 respectively.

~~(i)~~Senior Secured ~~Bantec,~~Credit ~~Inc.~~Facility ~~borrowed~~Note ~~$155,500~~- ~~and repaid $26,450, leaving an outstanding balance of $129,050, fees and interest charged totaled $4,576.~~Default

~~(ii)~~On September ~~Bantec~~13, ~~Sanitizing~~2016, ~~LLC~~the ~~borrowed~~Company ~~$14,562~~entered ~~and~~into ~~repaid~~a senior secured credit facility note with an investment fund for the acquisition of Howco. The Company can borrow up to $16,500,000, ~~leaving~~subject to lender approval, with an ~~outstanding~~initial ~~balance~~convertible promissory note at closing of $3,500,000 (the “Note”). The Note bore interest at a rate of 18% per annum, required monthly payments of $52,500, which was interest only, starting on October 13,~~562~~ 2016 through February 13, ~~fees~~2017, and monthly payments, including interest ~~charged~~and ~~totaled~~principal, of $1298,~~664~~341 starting on March 13, 2017 through maturity on March 13, 2018.

~~(iii)~~On September ~~Howco~~6, ~~borrowed $75~~2019,~~000~~ ~~and~~the ~~repaid~~Company ~~$42,250,~~received ~~including~~a ~~$7,570~~default ofnotice ~~fees~~on ~~and~~its ~~interest,~~payment ~~leaving~~obligations anunder ~~outstanding~~the ~~balance~~senior secured credit facility agreement from TCA. The Company had proposed a number of ~~$40,320~~solutions including refinancing the debt with other parties. ~~Howco~~The default was ~~making~~declared due ~~weekly~~to ~~payments~~non-payment of ~~$3,250~~monthly scheduled amortization (principal and interest). TCA holds security interests in all assets of the Company including its subsidiary Howco.

On April 2512, ~~2022~~2023, aEkimnel ~~promissory~~Strategies ~~note~~LLC, ~~was~~100% ~~issued to~~owned ~~the~~by ~~CEO~~Michael byBannon, ~~Howco~~Bantec’s ~~for~~Chairman, ~~$50~~CEO and CFO,~~000~~ ~~having~~purchased ~~weekly~~and ~~payments~~assumed, all of $1TCA’s rights and obligations as a lender under the Senior Secured Credit Facility Agreement dated May 31,~~570~~ ~~for~~2016 ~~fifty~~and ~~weeks~~effective September 13, ~~which~~2016 ~~includes~~and aall ~~total~~subsequent ofdocuments ~~$28,500~~from ofthe ~~interest~~Receiver for TCA Global Credit Master Fund, LP. ~~The~~On ~~principal~~August 12, 2023, the Company, atas ~~June~~the 30Borrower, ~~2023~~and the Company’s subsidiaries: Drone USA, LLC and ~~September~~Howco 30Distributing Co., ~~2022~~as ~~was~~Corporate $0Guarantors, and ~~$13~~Michael Bannon,~~527.~~ ~~Interest~~as ofa $4Validity Guarantor,~~713~~ ~~was~~entered ~~charged~~into an Amendment to ~~interest~~the ~~expense~~Agreement ~~during~~with Ekimnel, as the ~~nine~~Lender, ~~months~~pursuant to which the Company ~~ended~~issued ~~June~~the ~~30,~~Second ~~2022~~Replacement ~~prior~~Promissory Note to ~~repayment.~~Ekimnel ~~The~~in the principal amount of $8,676,957 which became a non-convertible note ~~was~~(see Note ~~repaid~~7 ~~faster~~for ~~than~~terms of the ~~original~~Promissory ~~payment~~Note). ~~terms~~Consequently, ~~and~~the ~~therefore~~Company recorded a total of $1,363,100 to additional paid in capital during fiscal year 2023 as a result of the ~~interest~~debt ~~was~~extinguishment ~~lower~~in connection with the assumption of the Senior Secured Debt by Ekimnel and removal ~~than~~of the ~~original~~put ~~agreement~~premium ~~terms~~on the convertible debt.

On April 12, 2023, Ekimnel Strategies LLC, 100% owned by Michael Bannon, Bantec’s Chairman, CEO and CFO, purchased and assumed, all of TCA’s rights and obligations as a lender under the Senior Secured Credit Facility Agreement dated May 31, 2016 and effective September 13, 2016 and all subsequent documents from the Receiver for TCA Global Credit Master Fund, LP. The value of the note at the time of agreement was valued at $8,546,334 including principal and accrued interest (also see Note 9 and 17).

NOTE 9 - CONVERTIBLE NOTES PAYABLE AND ADVISORY FEE LIABILITIES

The senior secured credit facility note balance and convertible debt balances consisted of the following at June 30, 2023 and September 30, 2022:

	June 30,		September 30,
	2023		2022
Principal	$	297,019	$	5,978,891
Premiums		288,448		1,443,435
	$	585,467	$	7,442,326

For the nine months ended June 30, 2023 and 2022, amortization of debt discount on the above convertible notes amounted to $0 and $19,937 respectively.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~Senior~~Other Convertible ~~Secured Credit Facility Note - Default~~Notes

~~On September 13, 2016, the Company entered into~~Scottsdale aCapital senior secured credit facility note with an investment fund for the acquisition of Howco. The Company can borrow up to $6,500,000, subject to lender approval, with an initial convertible promissory note at closing of $3,500,000 (the “Note”). The Note bears interest at a rate of 18% per annum, required monthly payments of $52,500, which is interest only, starting on October 13, 2016 through February 13, 2017, and monthly payments, including interest and principal, of $298,341 starting on March 13, 2017 through maturity on March 13, 2018. In the event of default, the Note balance will bear interest at 25% per annum. In connection with this Agreement, the Company was obligated to pay additional advisory fees of $850,000 payable in the form of cash or common stock in accordance with the terms of the Agreement. The Company was also required to reserve 7 shares of common stock related to this transaction. The reserved shares will be released upon the satisfaction of the loan.Advisors

AsOn March ~~of June 30~~7, ~~2023~~2018, ~~and September 30, 2022,~~ the Company ~~issued~~entered 1into ~~share~~a ofplacement ~~common~~agent ~~stock~~and inadvisory ~~satisfaction~~agreement ofwith ~~the~~Scottsdale ~~$850,000~~Capital ~~advisory~~Advisors ~~fee~~ in ~~accordance~~connection with the ~~terms~~Livingston ofliability ~~the~~purchase ~~agreement,~~term ~~such shares~~sheet ~~being~~executed ~~issued~~on inNovember ~~September~~15, ~~2016~~2017. The ~~proceeds~~placement ~~from~~agent ~~the~~services ~~sale~~fee ofamounted ~~the 1 share were~~ to ~~be applied to the~~ $~~850~~15,000 ~~advisory~~payable to ~~fee~~Scottsdale ~~due. Based~~Capital ~~upon~~Advisors in the ~~value~~form of ~~the~~a ~~shares,~~convertible atnote. ~~the~~The ~~time~~note ~~the~~matures ~~lender~~six ~~sells~~months ~~the~~from ~~shares,~~ the ~~Company~~date ~~may~~of beissuance ~~required~~and toaccrues ~~redeem unsold shares for the~~interest ~~difference~~at ~~between~~ the ~~$850,000~~rate ~~and~~of ~~the~~10% ~~lender’s~~per ~~sales proceeds~~annum. ~~Accordingly,~~The ~~the~~ $~~850~~15,000 ~~was~~note ~~reflected~~is asconvertible ainto ~~current~~shares ~~liability through~~of ~~December~~the ~~31,~~Company’s ~~2017.~~common Instock ~~January~~at ~~2018, in connection with~~ a ~~settlement~~discount ~~agreement~~of ~~(see~~30% ~~below),~~ of the ~~accrued~~low ~~advisory~~closing ~~fee~~bid ~~was~~price ~~reclassified to~~for the ~~principal~~twenty ~~balance~~trading ofdays ~~the~~prior ~~replacement~~to ~~Convertible Note. Through~~ the ~~date~~conversion ofand ~~the~~is ~~settlement~~not ~~agreement~~subject ~~and~~to ~~through~~any ~~June~~registration ~~30,~~rights. ~~2023~~The ~~and~~Company ~~September~~has ~~30,~~accounted ~~2022,~~for the ~~lender~~convertible ~~had~~promissory ~~not~~note ~~reported~~as ~~any~~stock ~~proceeds~~settled ~~from~~debt ~~the~~under ~~sale~~ASC of480 ~~these~~and ~~shares~~recorded ~~(see~~a ~~below).~~debt ~~Prior~~premium toof ~~the settlement agreement in January 2018~~$6,429 ~~notwithstanding~~with ~~anything~~a ~~contained in the Agreement~~ charge to ~~the~~interest ~~contrary,~~expense. inThe ~~the~~note ~~event the Lender~~ has not ~~realized~~been ~~net~~converted ~~proceeds from~~and the ~~sale~~principal ofbalance ~~Advisory~~is ~~Fee~~$15,000, ~~Shares equal to~~ at ~~least~~December ~~the~~31, ~~Advisory~~2023 ~~Fee~~and ~~by the earlier to occur of: (A)~~ September 1330, ~~2017; (B) the occurrence~~2023 ofwith ~~an Event of Default; or (C) the Maturity Date~~$9, ~~then at any time thereafter~~655, ~~the~~and ~~Lender shall have the right~~$9,277, ~~upon~~of ~~written~~accrued ~~notice to the Borrower~~interest, torespectively. ~~require~~As ~~that~~ the ~~Borrower~~note ~~redeem~~has ~~all~~matured ~~Advisory~~it ~~Fee~~is ~~Shares then~~ in ~~Lender’s~~default. ~~possession~~Under ~~for cash equal to~~ the ~~Advisory Fee,~~terms ~~less~~of ~~any cash proceeds received by~~ the ~~Lender~~note ~~from any previous sales of Advisory Fee Shares, if any within five (5) Business Days~~no ~~from~~default ~~the~~interest ~~date~~or ~~the~~penalties ~~Lender delivers such redemption notice to the Borrower~~accrue.

~~The Note is only convertible upon default or mutual~~Convertible ~~agreement~~notes byfor ~~both~~legal parties at a conversion rate of 85% of the lowest of the daily volume weighted average price of the Company’s common stock during the 5 business days immediately prior to the conversion date. At any time and from time to time while this Note is outstanding, but only upon: (i) the occurrence of an Event of Default under any of the Loan Documents; or (ii) mutual agreement between the Company and the Holder, this Note may be, at the sole option of the Holder, convertible into shares of the Company’s common stock, in accordance with the terms and conditions of the Note. Upon liquidation by the Holder of Conversion Shares issued pursuant to a conversion notice, provided that the Holder realizes a net amount from such liquidation equal to less than the conversion amount specified in the relevant conversion notice, the Company shall issue to the Holder additional shares of the Company’s common stock equal to: (i) the Conversion Amount specified in the relevant conversion notice; minus (ii) the realized amount, as evidenced by a reconciliation statement from the Holder (a “Sale Reconciliation”) showing the realized amount from the sale of the Conversion Shares; divided by (iii) the average volume weighted average price of the Company’s common stock during the five business days immediately prior to the date upon which the Holder delivers notice (the “Make-Whole Notice”) to the Company that such additional shares are requested by the Holder.services

~~Once~~From May a1, ~~default~~2022 ~~occurs~~until June 1, 2023, the ~~Note~~Company ~~and~~issued ~~the~~a $~~850~~4,000 ~~advisory~~ ~~fee~~convertible ~~payable~~notes ~~will~~every bemonth ~~accounted~~to the law firm for asfees ~~stock~~incurred, ~~settled~~each ~~debt~~note having atsix-month ~~its~~term ~~fixed~~to ~~monetary~~maturity ~~value~~and 10% annual interest. OnThe ~~March~~notes ~~13,~~are ~~2017,~~convertible ~~the~~into ~~Company~~shares ~~defaulted~~of common stock at a fixed discount onof 50% of the ~~monthly~~lowest ~~principal~~bid ~~and~~price ~~interest~~in ~~payment~~the of30 ~~$298,341.~~trading ~~Due~~days toimmediately ~~this~~preceding ~~default,~~the asnotice of ~~June~~conversion ~~30,~~from ~~2017,~~ the lender. The notes have cross default provisions. The Company has accounted for the ~~embedded~~ ~~conversion~~convertible ~~option~~promissory notes as stock settled debt under ASC 480 and recorded debt apremiums ~~debt~~equal ~~premium~~to the face value of ~~$617,647~~the notes with a charge to interest expense,. ~~and~~The ~~the~~notes ~~interest rate~~principal ~~increased~~amount were charged to ~~25%~~professional fees ~~(default~~during ~~rate)~~the month the notes were issued.

On December 1, 2023, the Company issued a $6,000 convertible note to the law firm for fees incurred, having a six-month term to maturity and 10% annual interest compounded monthly. The note is convertible into shares of common stock at a fixed discount of 70% of the lowest bid price in the 10 trading days immediately preceding the notice of conversion from the lender. The note has cross default provisions. The Company has accounted for the convertible promissory notes as stock settled debt under ASC 480 and recorded debt premiums equal to the face value of the notes with a charge to interest expense. The principal amount of the note was charged to professional fees during the month the note was issued. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded debt premium of $2,571.

On October 14, 2023, the Company entered into an Assignment Agreement with the law firm (the “Assignor”) and JP Carey Limited Partners, LP (the “Assignee”) whereby the Assignor desires to assign all of its rights and interest under certain convertible notes dated from May 1, 2022 to March 1, 2023 with a total principal amount of $44,000 and accrued interest of $4,854 to the Assignee for a purchase price of $44,000. All other terms and conditions under the assigned convertible notes remain the same and in full force and effect.

The principal balances owed to the law firm and Assignee under the agreement as of December 31, 2023 and September 30, 2023 were $62,000 and $56,000, respectively and accrued interest was $6,327 and $4,866 as of December 31, 2023 and September 30, 2023, respectively.

Convertible note issued to a vendor

On November 13, 2018, the Company issued a convertible promissory note for $90,000 to a vendor in settlement of approximately $161,700 of past due amounts due for services. The note bears interest at 5%, matured on June 30, 2019 and is convertible into the Company’s common stock at 50% of the lowest closing bid price during the 20 trading days immediately preceding the notice of conversion. The note matured on June 30, 2019, there is no default penalty or interest rate increase associated with the note, nor are there any cross-default provisions in the note. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded debt premium $90,000 with a charge to interest expense for the notes. At December 31, 2023 and September 30, 2023 the principal and premium were both $90,000. At December 31, 2023 and September 30, 2023, accrued interest was $49,229 and $46,961, respectively (see Note 13).

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~On March 28, 2017, the Company entered into an~~1800 ~~additional~~Diagonal ~~agreement~~Lending with the above senior secured credit facility lender to receive a range of advisory services for a total of $1,200,000 with no definitive terms or length of service which was expensed in fiscal 2017 and had been recorded as an accrued liability – advisory fees through December 31, 2017. In connection with the settlement agreement discussed below, in January 2018, the advisory services fees payable were reclassified to the principal balance of the replacement Convertible Note.LLC

On September ~~January 3~~6, ~~2018~~2023, the Company entered into ~~a settlement agreement (~~the ~~“Settlement~~Securities Purchase Agreement”) ~~and~~with ~~replacement~~1800 ~~note~~Diagonal ~~agreements~~Lending ~~with~~LLC (the ~~investment~~“Lender”), pursuant ~~fund~~to ~~related~~which tothe aCompany ~~senior secured~~issued ~~credit~~a ~~facility~~promissory note ~~dated~~to ~~September~~the ~~13,~~Lender ~~2016.~~in On the ~~effective~~principal ~~date~~amount of ~~the Settlement Agreement~~$49,000, ~~all~~including ~~amounts~~a ~~owed~~debt toissuance ~~the investment~~cost ~~fund~~of ~~aggregated~~ $5,~~788,642~~000 ~~and~~to ~~consisted~~be amortized over the term of athis ~~convertible~~note. ~~promissory~~The note ofmatures $3on September 6,~~500,000,~~ ~~accrued~~2024 and bears interest ~~payable~~at of10% ~~$238,642,~~per ~~and~~annum. ~~accrued~~The ~~advisory~~conversion ~~fees~~price ~~payable~~shall ofbe ~~$2,050,000.~~a Onvariable ~~the~~conversion ~~effective~~price ~~date~~equal to 65% of the ~~Settlement~~average ~~Agreement,~~of the ~~amount~~two ~~due~~lowest ofclosing ~~$5,788,642~~price ~~was~~per ~~split~~share ~~and~~of ~~apportioned~~the common ~~into~~stock ~~two~~during ~~separate~~the ~~replacement~~fifteen ~~notes~~trading ~~(“Replacement~~day ~~Note~~period A”ending ~~and~~on ~~Note~~the ~~B”).~~latest ~~Replacement~~complete ~~Note~~trading Aday ~~had~~prior ato ~~principal~~the ~~amount~~conversion ~~of $1~~date,~~000~~ provided,~~000~~ however, that the Lender and ~~Replacement~~its ~~Note~~affiliates Bmay ~~had~~not abeneficially ~~principal~~own ~~balance~~more ofthan $4~~,788,642,~~.99% ~~both~~ of ~~which~~the ~~remained~~Company’s ~~secured~~outstanding byshares ~~the~~of ~~original~~common ~~security, pledge~~stock ~~and~~upon ~~guarantee~~the ~~agreements;~~conversion ~~and~~of ~~other~~the ~~applicable~~September ~~loan documents~~6, ~~and~~2023 ~~bear interest at 18% per annum~~note. The ~~default~~Company ~~was~~has ~~not~~accounted ~~waived~~for bythe ~~this settlement~~convertible ~~agreement.~~promissory ~~The~~note ~~Company~~as ~~originally~~stock ~~recorded~~settled adebt under ~~premium~~ASC on480 ~~stock~~and ~~settled~~recorded debt ofpremium $~~617~~26,~~647~~385 onwith ~~the~~a ~~$3,500,000,~~charge ~~and subsequent~~ to ~~the~~ ~~settlement~~interest ~~agreement~~expense ~~recorded~~for anthe ~~additional~~note. ~~premium~~At onSeptember ~~stock~~30, ~~settled~~2023, ~~debt~~principal ofbalance and ~~$403,878~~accrued oninterest ~~the~~was ~~additional~~ $249,~~288,642~~000 ~~for accrued interest~~ and ~~advisory~~$322, ~~fees~~respectively. ~~payable~~At ~~that~~December ~~were~~31, ~~capitalized~~2023, asprincipal ~~note~~balance ~~principal.~~and ~~The~~accrued interest ~~rate~~ was ~~amended~~$49,000 ~~to 12% effective June 12~~and $1,557, ~~2018~~respectively.

~~The~~On December ~~Credit~~11, ~~Agreement~~2023, ~~was~~the ~~amended~~Company ~~such~~entered ~~that~~into the ~~maturity~~ ~~date~~Securities ~~was~~Purchase ~~extended~~Agreement towith ~~January~~1800 ~~13,~~Diagonal ~~2019~~Lending ~~(the~~LLC, ~~“Extended~~pursuant ~~Maturity~~to ~~Date”)~~which ~~for~~the ~~replacement~~Company issued ~~Note~~a B,promissory ~~while~~note to the ~~Note~~Lender Ain ~~maturity date~~the ~~remained~~principal atamount ~~March~~of 13$40,000, ~~2018~~including ~~but~~a ~~was~~debt ~~due~~issuance ascost of ~~March~~$5,000 ~~2017~~to ~~due~~be toamortized over the ~~principal~~term ~~and~~of ~~interest~~this ~~payment~~note. ~~default~~The ~~discussed~~note ~~above.~~matures ~~Notwithstanding anything~~on ~~contained~~December in11, ~~this~~2024 ~~Agreement~~and tobears ~~the~~interest ~~contrary,~~at ~~all~~12% ~~obligations~~per ~~owing~~annum. byThe ~~the~~conversion ~~Company~~price ~~and~~shall ~~all~~be ~~other~~a ~~Credit~~variable conversion ~~Parties~~price ~~under~~equal ~~the~~to ~~Credit Agreement,~~65% ~~First~~of ~~Replacement~~the ~~Note~~average B,of ~~and~~the ~~all~~two ~~other~~lowest ~~Loan~~closing ~~Documents~~price ~~shall~~per beshare ~~paid~~of inthe ~~full~~common bystock during the ~~Extended~~fifteen ~~Maturity~~trading day ~~Date~~period asending ~~follows:~~on ~~$52,500 per~~the ~~month~~latest ~~from~~complete ~~January~~trading ~~13,~~day ~~2018~~prior to ~~December~~the 13conversion date, ~~2018~~provided, ~~and~~however, that the ~~remaining~~Lender ~~principal~~ and ~~accrued~~its ~~interest~~affiliates may onnot ~~January~~beneficially ~~13,~~own ~~2019.~~more ~~Interest~~than ~~payments made~~4.99% ~~since~~of the ~~amendment~~Company’s ~~have~~outstanding ~~totaled~~shares ~~$323,440~~of ~~and~~common ~~are~~stock ~~therefore~~upon ~~not~~the inconversion ~~accord~~of ~~with~~the ~~that~~December 11, ~~amendment~~2023 note. ~~However,~~The ~~TCA~~Company has ~~received~~accounted ~~payments under~~for the ~~3(a)~~convertible ~~(10)~~promissory ~~settlement~~note ~~(below)~~as ~~totaling~~stock ~~$308,100~~settled ~~during~~debt ~~the~~under ~~year~~ASC ~~ended~~480 ~~September~~and ~~30,~~recorded ~~2018,~~debt ~~and~~premium of ~~another~~ $~~270~~21,~~320,~~538. ~~during~~At ~~the~~December ~~year ended~~31, ~~September 30~~2023, ~~2019. The~~ principal balance and accrued interest was $440,~~788,642~~000 atand ~~September 30~~$263, ~~2018~~respectively.

OnNOTE ~~October~~9 ~~30,~~– ~~2018,~~NOTES ~~TCA,~~AND ~~the~~LOANS ~~Company’s~~PAYABLE ~~senior~~AND ~~lender,~~OTHER amended its credit facility which had been restructured in January 2018 when fees for advisory and other matters along with accrued but unpaid interest were capitalized and separated into two notes, Note A having $1,000,000 principal and Note B having $4,788,642 both having the same maturity terms, interest rates and conversion rights. Under the current amendment total amounts outstanding under the notes along with accrued interest of $537,643 has been capitalized with the principal amount due of $6,018,192, $5,326,285 for Note B and $691,907 for Note A. The restated note has the same conversion price discount and therefore continues to be stock settled debt under ASC 480, an additional $94,878 was charged to interest with a credit to debt premium. The restated note accrues interest on the principal balance at 12% per annum, includes amortization to the new maturity date of December 15, 2020. The amortization payments credited toward the principal amount and accrued interest vary and include payments made under the 3(a)(10) settlement agreement with a third party related to Note A. Economically the total principal and accrued interest outstanding remain unchanged as reported in the consolidated balance sheet. All other terms including conversion rights and a make-whole provision in the case of a conversion shortfall remain the same as stated in the footnotes above.ADVANCES

~~On September 6, 2019, the Company received a default~~The ~~notice~~notes onbalance ~~its~~consisted ~~payment obligations under the senior secured credit facility agreement from TCA. The Company has proposed a number~~ of ~~solutions including refinancing~~ the ~~debt~~following ~~with~~at ~~other~~December ~~parties.~~31, ~~The~~2023 ~~default was declared due to non-payment of monthly scheduled amortization (principal~~ and ~~interest).~~September ~~TCA~~30, ~~holds security interests in all assets of the Company including its subsidiary Howco (see below).~~2023

	December 31, 2023			September 30, 2023
Principal loans and notes	$	1,149,211		$	1,077,013
Discounts		(75,371	)		(63,161	)
Total		1,073,840			1,013,852
Less Current portion		(923,840	)		(863,852	)
Non-current	$	150,000		$	150,000

For the three months ended December 31, 2023 and 2022, amortization of debt discount on the above notes amounted to $32,667 and $91,009, respectively.

Small Business Administration

On June 17, 2020, the Company through Howco, entered into a loan directly with the Small Business Administration for $150,000. The loan term is thirty years and begins amortization one year from the date of promissory note to be issued upon funding. Amortization payments are $731 per month and include interest and principal of 3.75% from the date of funding. The loan is secured by the assets of Howco. As of December 31, 2023 and September 30, 2023, the principal balance and accrued interest on this note amounted to $150,000, $15,010 and $150,000, $13,621, respectively. During the year ended September 30, 2023, the Company paid accrued interest of $4,386. As of December 31, 2023 and September 30, 2023, the $150,000 is classified as non-current.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~On January 30, 2018, pursuant to the Liability~~Notes ~~Purchase~~payable Term Sheet, the TCA Replacement Note A in the principal amount of $1,000,000 was acquired by Livingston Asset Management LLC (“Livingston”) from the original lender. Principal of Replacement Note A is due to ~~Livingston~~service with all then accrued but unpaid interest due to the original lender. In accordance with the terms of the Settlement Agreement, the Court was advised of the Company’s intention to rely upon the exception to registration set forth in Section 3(a)(l0) of the Securities Act to support the issuance of its common shares and the Court held a fairness hearing regarding the issuance on March 12, 2018. Following entry of an Order by the Court which occurred on March 12, 2018, in settlement of the claims, the Company shall issue and deliver to Livingston shares of its common stock (the “Settlement Shares”) in one or more tranches as necessary, and subject to adjustment and ownership limitations as set forth in the Settlement Agreement, sufficient to generate proceeds such that the aggregate Remittance Amount equals the Claim Amount. The Company will issue free trading shares of its common stock under section 3(a) (10) of the Securities Act to Livingston in the amount of such judgment in a series of tranches so that Livingston will not own more than 9.99% of the Company’s outstanding shares per tranche. The parties reasonably estimate that the fair market value of the Settlement Shares to be received by Livingston is equal to approximately $1,666,667 which is based on a discount of 40%.vendor

~~In the nine months ended June 30, 2023, there~~During ~~were~~fiscal noyear ~~3(a)(10) issuances. As of June 30~~2021, ~~2023,~~the ~~there~~Company ~~have~~issued ~~been~~seven ~~seventeen~~notes ~~issuances~~payable ~~under Section 3(a) (10) of the Securities Act~~ totaling ~~1,375~~ ~~shares; 1~~$17,~~273, in 2019, and 102, in 2018, which have been recorded at par value with an equal charge to additional paid-in capital~~500. On ~~November~~The ~~17,~~notes ~~2019,~~were ~~195 of the shares~~ issued ~~under~~for ~~Section~~monthly 3fees (a$2,500)~~(10)~~ ~~were~~for ~~cancelled~~a ~~at the request of Livingston. The value originally~~service ~~recorded~~vendor ~~as a liability remains in the convertible note balance, until these shares have been sold~~ and ~~reported~~are toissued the ~~Company~~first byday ~~the lender as part~~ of the ~~Make-Whole~~month ~~provision at which time the proceeds value of such shares are reclassified to additional paid-in capital. During the years ended September 30, 2018~~ and ~~September~~each ~~30,~~has ~~2019,~~one ~~proceeds~~year ofmaturity ~~$308,100~~ and ~~$270,320,~~does ~~respectively~~not ~~were~~bear ~~remitted to TCA by Livingston and applied to reduce the liability with corresponding credits to additional paid in capital~~interest. ~~$180,618~~The ofservice ~~debt~~arrangement ~~premium~~ was ~~credited~~terminated ~~to additional paid~~ in ~~capital~~April in2021, ~~conjunction~~ with ~~the~~$17,500 ~~payments~~owed toas ~~TCA.~~of AtDecember ~~June 30~~31, 2023 and September 30, ~~2022, the balance, of $421,587 along with related debt premium of $281,054 are included in convertible notes payable on the balance sheet~~2023.

~~At June 30, 2023 and September 30, 2022, the principal~~Trillium ~~of the Note B portion was $5~~Partners,~~326,285~~ and accrued interest was $2,958,251 and $2,377,557 respectively and the Note A principal subject to the 3(a) (10) court order was $421,587 as noted above. During the nine months ended June 30, 2023, the Company has not paid interest or principal and Livingston Asset Management (under the 3(a)(10) settlement) has not made any payments to TCA. (see Note 17)LP

On July ~~April 12~~1, ~~2023~~2022, ~~Ekimnel~~the ~~Strategies~~Company ~~LLC~~entered into a Securities Purchase Agreement with Trillium Partners, ~~100%~~LP (“Trillium”). Under the ~~owned~~terms byof ~~Michael~~the ~~Bannon~~SPA, ~~Bantec’s~~Trillium ~~Chairman~~agreed to advance funds under a merchant financing arrangement, ~~CEO~~treated as a loan. The loan principal is $224,000, including legal fees of $5,000 and ~~CFO~~OID of $24,000, ~~purchased~~the Company received cash of $195,000. Loan bears interest of 12% per annum and ~~assumed~~matured on June 30, ~~all~~2023. The Company agreed to issue 224,000 shares of ~~TCA~~the Company’s ~~rights~~Series B Preferred Stock, and ~~obligations~~a asWarrant to purchase a1,120,000 ~~lender~~shares ~~under~~of common stock as consideration for the ~~Senior~~advance ~~Secured~~agreement. ~~Credit~~The ~~Facility~~Series ~~Agreement~~B ~~dated~~Preferred ~~May~~Stock ~~31,~~met ~~2016~~the criteria for treatment as temporary equity and ~~effective~~debt ~~September~~discount 13of $50,684 ~~2016~~was ~~and~~recognized. ~~all~~The ~~subsequent~~Warrant ~~documents~~caused ~~from~~a recognition of $100,194 in debt discount. Total debt discount recognized was $179,878, to be amortized over the ~~Receiver~~term ~~for~~of ~~TCA~~the ~~Global~~loan, ~~Credit~~$44,846 ~~Master~~was ~~Fund~~recognized as interest expense as of September 30, LP2022 from amortization of discounts. The ~~value~~Company defaulted on the weekly payment terms of the note; athowever, the ~~time~~note holder granted a limited waiver of ~~agreement~~the ~~was~~default. ~~valued~~Under the waiver amendment, the default interest rate still applies and now the note accrues interest of 22% and the payments are due upon the notes maturity. Total accrued interest at $8December 31,~~546~~ 2023 and September 30,~~334~~ ~~including~~2023 ~~principal~~was $54,16 and $43,994, respectively. On October 25, 2022, the Company repaid $50,000 of the July merchant financing arrangement. The payment was applied to the Trillium LP notes’ accrued interest ~~(also~~and ~~see~~principal ~~Note~~bringing 8its principal balance to $183,259, at December 31, 2023 and ~~17)~~September 30, 2023.

~~Other~~JP Carey ~~Convertible~~Limited ~~Notes~~Partners, LP

On July ~~March 7~~1, ~~2018~~2022, the Company entered into a ~~placement agent~~Securities ~~and~~Purchase ~~advisory~~Agreement ~~agreement~~ with ~~Scottsdale~~JP ~~Capital~~Carey ~~Advisors~~Limited inPartners, ~~connection~~LP ~~with~~(“JPC”). Under the ~~Livingston~~terms ~~liability~~of ~~purchase~~the ~~term~~SPA, ~~sheet~~JPC ~~executed on~~agreed ~~November~~to ~~15,~~advance ~~2017.~~funds ~~The~~under ~~placement~~a ~~agent~~merchant ~~services~~financing ~~fee~~arrangement, ~~amounted~~treated toas ~~$15,000~~a ~~payable~~loan. toThe ~~Scottsdale~~loan ~~Capital~~principal ~~Advisors~~is in$224,000, including ~~the~~legal ~~form~~fees of a$5,000 ~~convertible note.~~and ~~The~~OID ~~note~~of ~~matures~~$24,000, ~~six~~the ~~months~~Company ~~from~~received ~~the~~cash ~~date~~ of ~~issuance~~$195,000. ~~and~~Loan ~~accrues~~bears interest ~~at the rate~~ of 1012% per annum and matured on June 30, 2023. The ~~$15,000~~Company ~~note~~agreed isto ~~convertible into~~issue 224,000 shares of the Company’s ~~common~~Series ~~stock~~B atPreferred Stock, and a ~~discount~~Warrant ofto ~~30%~~purchase 1,120,000 shares of ~~the~~common ~~low~~stock ~~closing~~as ~~bid~~consideration ~~price~~ for the ~~twenty~~advance ~~trading~~agreement. ~~days~~The ~~prior~~Series to B Preferred Stock met the ~~conversion~~criteria ~~and~~for istreatment as ~~not~~temporary ~~subject~~equity toand ~~any~~debt ~~registration~~discount ~~rights~~of $50,684 was recognized. The ~~Company~~Warrant ~~has~~caused ~~accounted~~a ~~for~~recognition ~~the~~of ~~convertible~~$100,194 ~~promissory~~in ~~note~~debt asdiscount. ~~stock settled~~Total debt ~~under~~discount ~~ASC~~recognized ~~480~~was ~~and~~$179,878, ~~recorded~~to abe ~~debt~~amortized ~~premium~~over the term of the loan, $644,~~429~~845 ~~with~~was arecognized ~~charge~~as to interest expense as of September 30, 2022 from amortization of discounts. The Company defaulted on the weekly payment terms of the note; ~~has~~however, ~~not~~the ~~been~~note ~~converted~~holder granted a limited waiver of the default. Under the waiver amendment, the default interest rate still applies and now the ~~principal balance~~note isaccrues ~~$15~~interest of 22%,~~000,~~ and the payments are due upon the notes maturity. Total accrued interest at ~~June~~December 3031, 2023 and September 30, ~~2022~~2023 ~~with~~was $872,~~899,~~ 624 and $760,~~777~~202, ~~of accrued interest,~~ respectively. As ~~the~~of ~~note~~December ~~has matured~~31, it2023 isand inSeptember ~~default.~~30, ~~Under~~2023, the ~~terms~~principal ofbalance ~~the~~amounted ~~note~~to no$224,000 ~~default~~for ~~interest~~both ~~or penalties accrue~~periods.

~~On December 1, 2021, the Company terminated its~~Itria ~~agreement~~Ventures ~~with Livingston Asset Management and entered into a consulting and services arrangement with Frondeur Partners~~ LLC which has no stipulated term. The arrangement provides for financial management services including accounting and related periodic reporting among other advisory services. Under the agreement, the Company is obligated to issue to Frondeur Partners LLC convertible notes having principal of $15,000, interest of 10% per annum, maturity of seven months. The notes are convertible into shares of common stock at a discount of 50% to the lowest bid price in the twenty trading days immediately preceding the notice of conversion.

On April 28, 2023, Howco executed a sale of receivables agreement with Itria Ventures LLC (“Itria”), Itria funded $125,000, which included fees of $6,750 withheld for a net payment to Howco of $118,250. Itria will withdraw weekly repayments of $3,255.21 for 48 weeks. The total repayments is $156,250, including interest totaling $31,250. The Company recognized a total of $38,000 of debt discount related to this agreement to be amortized over the term of the receivable agreement.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~Between~~On September ~~March 1~~14, ~~2022 and August 1~~2023, ~~2022, the~~Howco ~~Company~~executed ~~issued~~a ~~convertible~~sale ~~promissory notes to Frondeur Partners LLC for an aggregate principal amount~~ of ~~$90,000~~receivables ~~for services (service~~ agreement ~~replacing agreement~~ with ~~Livingston~~Itria ~~Asset~~Ventures ~~Management~~ LLC)., ~~The~~Itria ~~convertible~~funded ~~notes~~$75,000, ~~bear~~which ~~interest~~included offees ~~10% per annum and matures in nine months. The notes issued were convertible into shares~~ of ~~common~~$3,500 ~~stock~~withheld atfor a ~~discount~~net ofpayment ~~50%~~to Howco of ~~the lowest closing bid price during the thirty trading days prior to conversion~~$71,500. ~~The~~Itria ~~notes~~will ~~have~~withdraw ~~conversion~~weekly ~~feature~~repayments ~~and are treated as stock settled debt under ASC 480 and a total debt premium~~ of $901,~~000~~953 ~~were~~for ~~recognized~~48 asweeks. ~~interest~~The ~~expense~~total ~~on note issuance dates. At~~repayments ~~September~~is 30$93,750, ~~2022~~including ~~the accrued~~ interest ~~was~~totaling $318,~~203~~750. ~~Between~~The ~~October 3, 2022 and March 2023, the~~ Company ~~issued~~recognized ana ~~aggregate~~total of 2 $22,~~090,007~~250 ~~shares~~ of ~~common~~debt ~~stock~~discount inrelated ~~conversion~~to ofthis ~~Frondeur Partners LLC, convertible note payables dated from March 1, 2022 to~~agreement ~~August~~to 1,be ~~2022,~~amortized ~~all~~over ~~principal~~the ofterm ~~$90,000 and accrued interest~~ of ~~$5,388~~the ~~were~~receivable ~~converted~~agreement. ~~Premium of $90,000 was reclassified to additional paid in capital.~~

~~Between~~During the ~~September~~year 1,ended ~~2022~~September ~~to May 1~~30, 2023, the Company ~~issued~~repaid ~~convertible promissory notes to Frondeur Partners LLC for an aggregate amount of~~ $~~135~~72,~~000 in principal for services (service agreement replacing agreement with Livingston Asset Management LLC)~~265. ~~The~~As ~~convertible~~of ~~notes~~September ~~bear~~30, ~~interest~~2023, ~~ranging~~the ~~from~~total ~~10%~~loan balance to ~~12%~~Itria ~~per~~amounted ~~annum~~to ~~and~~$177,810, ~~matures~~net ~~in nine months. The notes issued are convertible into shares~~ of ~~common~~unamortized ~~stock~~debt ~~at a~~ discount of ~~50%~~$42,050. ofDuring the ~~lowest~~three ~~closing~~months ~~bid price~~ended ~~during~~December ~~the~~31, ~~thirty~~2023, ~~trading~~the ~~days~~Company ~~prior~~repaid ~~to conversion~~$67,709. ~~The~~As of ~~notes~~December ~~have~~31, ~~conversion~~2023, ~~features~~the ~~and~~total ~~are~~loan ~~treated~~balance asto ~~stock~~Itria ~~settled~~amounted ~~debt~~to ~~under ASC~~$110,101, ~~480~~net ~~and~~of aunamortized ~~total~~ debt ~~premium~~discount of $~~135~~26,~~000 is recognized as interest expense on the note issuance dates~~124.

~~The principal balance for the Frondeur notes was~~Samson ~~$135,000~~MCA and $105,000 at June 30, 2023 and September 30, 2022, respectively, as detailed above. Accrued interest for these notes totaled $6,725 and $3,631 at June 30, 2023 and September 30, 2022, respectively also detailed above.LLC

~~From~~On October ~~May 1~~24, ~~2022 until June 1,~~ 2023, the Company ~~issued~~’s asubsidiary, $4Howco,~~000~~ ~~convertible~~executed ~~notes~~a ~~every~~sale ~~month~~of tofuture ~~the~~receipt ~~law~~agreement ~~firm~~with ~~for~~Samson ~~fees~~MCA ~~incurred,~~LLC ~~each~~(“Samson”). Under ~~note~~the ~~having~~agreement, ~~six-month~~the ~~term~~Company tosold ~~maturity~~$136,000 ~~and~~in ~~10%~~future ~~annual interest.~~receipt ~~The~~or ~~notes~~receivables ~~are~~for ~~convertible~~a ~~into~~purchase ~~shares~~amount of ~~common~~$100,000. ~~stock~~The atprincipal aamount is ~~fixed~~payable ~~discount~~in ofweekly ~~50%~~installments of ~~the~~$3,400 ~~lowest~~until ~~bid~~such ~~price~~time inthat the 30obligation ~~trading~~is ~~days immediately~~fully ~~preceding~~satisfied ~~the~~for ~~notice~~approximately of10 ~~conversion from the lender~~months. The ~~notes~~Company received ~~have~~$96,875 ~~cross~~(net ~~default~~of ~~provisions.~~origination ~~The~~fee ~~Company~~of ~~has~~$3,000 ~~accounted~~which ~~for the~~will ~~convertible~~be ~~promissory~~amortized ~~notes~~over asterm ~~stock~~of ~~settled~~this ~~debt~~agreement ~~under ASC 480~~ and ~~recorded~~$125 ~~debt~~processing ~~premiums~~fee). ~~equal~~The Company tohas the ~~face~~option ~~value~~to ofrepurchase the ~~notes~~receipts ~~with a~~it ~~charge~~sold to ~~interest~~Samson ~~expense.~~during ~~The~~the ~~note~~first ~~principal~~month ~~amount~~to ~~was~~the ~~charged~~sixth tomonth ~~professional~~from ~~fees~~the ~~during~~date ~~the~~of ~~month~~this ~~the~~agreement ranging ~~note~~from ~~was~~$118,000 ~~issued~~to $127,000.

~~The~~During the ~~principal~~three ~~balances~~months ~~owed~~ended toDecember ~~the~~31, ~~law~~2023, ~~firm under~~ the ~~agreement~~Company asrepaid ~~of June~~ $30,600. ~~2023~~As ~~and~~of ~~September~~December 3031, ~~2022 were $56~~2023,~~000,~~ ~~and~~the ~~$20,000~~total ~~respectively~~loan ~~and~~balance ~~accrued~~to ~~interest~~Samson ~~was~~amounted to $3105,~~455~~400, ~~and~~net ~~$563 as~~ of ~~June~~unamortized ~~30,~~debt ~~2023,~~discount ~~and~~of ~~September~~ $30, ~~2022, respectively~~225.

~~On November 13, 2018, the Company issued a convertible~~1800 ~~promissory~~Diagonal ~~note~~Lending for $90,000 to a vendor in settlement of approximately $161,700 of past due amounts due for services. The note bears interest at 5%, matures on June 30, 2019 and is convertible into the Company’s common stock at 50% of the lowest closing bid price during the 20 trading days immediately preceding the notice of conversion. The note matured on June 30, 2019, there is no default penalty or interest rate increase associated with the note, nor are there any cross-default provisions in the note. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded debt premium $90,000 with a charge to interest expense for the notes. At June 30,2023 and September 30, 2022 the principal, and premium were both $90,000. At June 30, 2023 and September 30, 2022 accrued interest was $44,692 and $36,614, respectively (see Note 15).LLC

On July 17, 2023, the Company entered into the Securities Purchase Agreement (the “Agreement”) with 1800 Diagonal Lending LLC (“Lender”), pursuant to which the Company issued a promissory note (the “Note”) to the Lender in the principal amount of $90,400, including an original issue discount of $10,400 and legal fees of $5,000. The Agreement contains certain customary representations, warranties, and covenants made by the Company. Under the Note, the Company is required to make ten payments of $10,305.60, which includes a one-time interest charge of 14% ($12,565). The first payment is due on August 30, 2023, with nine subsequent payments due each month thereafter. The Note is not secured by any collateral. The Note matures on May 15, 2024 and contains customary events of default.

On October 26, 2023, the Company entered into the Securities Purchase Agreement with 1800 Diagonal Lending LLC, pursuant to which the Company issued a promissory note to the Lender in the principal amount of $90,400, including an original issue discount of $10,400 and legal fees of $5,000. The Agreement contains certain customary representations, warranties, and covenants made by the Company. Under the Note, the Company is required to make ten payments of $10,305.60, which includes a one-time interest charge of 14% ($12,565). The first payment is due on November 30, 2023, with nine subsequent payments due each month thereafter. The Note is not secured by any collateral. The Note matures on August 30, 2024 and contains customary events of default.

Upon the occurrence and during the continuation of any such event of default, the notes above will become immediately due and payable, and the Company is obligated to pay to the Lender an amount equal to 150% times the sum of (w) the then outstanding principal amount of the note plus (x) accrued and unpaid interest on the unpaid principal amount of the note to the date of payment plus (y) default interest at 22% per annum on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Lender pursuant to Article IV of the note (amounts set forth in clauses (w), (x), (y) and (z) are collectively referred to as the “Default Amount”). If the Company fails to pay the Default Amount within five (5) business days of the Lender’s written notice that such amount is due and payable, then the Lender has the right to convert the balance owed pursuant to the note, including the Default Amount, into shares of common stock of the Company (“Common Stock”) at a variable conversion price equal to 61% of the lowest closing price pe share of Common Stock during the ten trading day period ending on the latest complete trading day prior to the conversion date, provided that the Lender and its affiliates may not own greater than 4.99% of the Company’s outstanding shares of Common Stock, as set forth in the Note. The Company used the proceeds from the note for general working capital purposes.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~NOTE~~During the 10year –ended ~~NOTES~~September ~~AND~~30, ~~LOANS~~2023, ~~PAYABLE~~the Company repaid $20,611. As of September 30, 2023, the note balance amounted to $72,921, net of unamortized debt discount of $11,588.

~~The~~During the three months ended December 31, 2023, the Company repaid $30,917 towards these notes. ~~balance~~The ~~consisted~~Company ofdid not make the ~~following~~required atDecember ~~June~~2023 30payments for a total of $20,611. In December 2023, the Company and ~~September~~the 30lender have renegotiated a revised payment plan. The lender agreed to modify the required payments to weekly payments of $5,000 ~~2022~~starting in January 2024. Accordingly, these notes are not considered in default. As of December 31, 2023, the note balance amounted to $138,951, net of unamortized debt discount of $19,023.

	June 30, 2023			September 30, 2022
Principal loans and notes	$	704,967		$	615,500
Discounts		(31,091	)		(270,064	)
Total		673,876			345,436
Less Current portion		(523,876	)		(217,897	)
Non-current	$	150,000		$	127,539

Promissory note for legal services

~~For~~On September ~~the~~14, ~~nine~~2023, ~~months~~the ~~ended~~Company ~~June~~issued 30a $15,000 promissory note to a law firm for fees to be incurred for the preparation of the Company’s registration statement which was completed in November 2023. ~~and~~The ~~2022~~maturity date of this note is March 15, 2024 and bears 10% interest ~~amortization~~per ofannum. ~~debt~~The ~~discount~~principal onbalance ~~the~~and ~~above~~accrued ~~notes~~interest ~~amounted~~owed to the law firm under the agreement as of September 30, 2023 were $~~276~~15,~~972~~000, and $66 respectively. The principal balance and accrued interest owed to the law firm under the agreement as of December 31, 2023 were $4515,~~816~~000, and $444 respectively.

~~On June 17, 2020, the Company through Howco, entered~~Default ~~into~~on aNotes ~~loan directly with the Small Business Administration for $150,000. The loan term is thirty years~~ and begins amortization one year from the date of promissory note to be issued upon funding. Amortization payments are $731 per month and include interest and principal of 3.75% from the date of funding. The loan is secured by the assets of Howco. As of June 30, 2023 and September 30, 2022, the principal balance is $150,000. As of June 30, 2023 and September 30, 2022, $0, and $22,461 respectively, is classified as current.Loans

~~During~~On July 26, 2023, the ~~year~~Company ~~ended~~received ~~September~~a ~~30,~~demand ~~2021,~~and ~~the~~default letter from Trillium Partners L.P. The letter references a document titled “Securities ~~Company~~Purchase ~~issued~~Agreement” ~~seven~~dated ~~notes~~July ~~payable~~2022. ~~totaling~~In the demand letter, Trillium is looking for immediate payment of $17275,~~500~~710. ~~The~~On ~~notes~~August ~~were~~4, 2023, ~~issued~~the ~~for~~Company ~~monthly~~received ~~fees~~a (demand notification revising the demand amount to $2214,~~500)~~563 ~~for~~with a$183,259 ~~service~~in ~~vendor~~principal and ~~are~~$31,304.33 ~~issued~~in ~~the~~interest ~~first~~and ~~day~~for ofJP ~~the~~Carey, ~~month~~a ~~and~~total ~~each~~of ~~has~~$270,947.95 ~~one~~with ~~year~~$224,000 ~~maturity~~in principal and ~~does~~$46,947.95 ~~not~~in ~~bear~~accrued interest. ~~The~~In ~~service~~addition, ~~arrangement~~the ~~was~~demand notification ~~terminated~~included inoutstanding ~~April 2021~~fee notes for Frondeur Partners LLC, ~~with~~a total of $17135,~~500~~000 ~~owed~~in principal and $7,903 of accrued interest. According to the demand notification, as of ~~June~~December 3031, 2023, ~~and~~five ~~September~~notes, 30dated from October 1, 2022 to February 2023, matured. A company representative is in talks with Trillium and the Company is looking to resolve the matter amicably.

~~On July 1, 2022, the Company entered into a Securities~~NOTE ~~Purchase~~10 ~~Agreement~~- ~~with~~SERIES Trillium Partners, LP (“Trillium”). Under the terms of the SPA, Trillium agreed to advance funds under a merchant financing arrangement, treated as a loan. The loan principal is $224,000, including legal fees of $5,000 and OID of $24,000, the Company received cash of $195,000. Loan bears interest of 12% per annum and matures on June 30, 2023. The Company agreed to issue 224,000 shares of the Company’s Series B ~~Preferred~~AND ~~Stock,~~SERIES ~~and~~C aPREFERRED Warrant to purchase 1,120,000 shares of common stock as consideration for the advance agreement. The Series B Preferred Stock met the criteria for treatment as temporary equity and debt discount of $50,684 was recognized. The Warrant caused a recognition of $100,194 in debt discount. Total debt discount recognized was $179,878, to be amortized over the term of the loan, $44,846 was recognized as interest expense as of September 30, 2022 from amortization of discounts. The Company defaulted on the weekly payment terms of the note; however, the note holder granted a limited waiver of the default. Under the waiver amendment (see Note 11), the default interest rate still applies and now the note accrues interest of 22% and the payments are due upon the notes maturity. Total accrued interest at June 30, 2023 and September 30, 2022 was $33,832 and $10,923, respectively. On October 25, 2022, the Company repaid $50,000 of the July merchant financing arrangement. The payment was applied to the Trillium LP notes’ accrued interest and principal bringing its principal balance to $183,259, at June 30, 2023.STOCK

On July 1, 2022, the Company entered into a Securities Purchase Agreement with JP Carey Limited Partners, LP (“JPC”). Under the terms of the SPA, JPC agreed to advance funds under a merchant financing arrangement, treated as a loan. The loan principal is $224,000, including legal fees of $5,000 and OID of $24,000, the Company received cash of $195,000. Loan bears interest of 12% per annum and matures on June 30, 2023. The Company agreed to issue 224,000 shares of the Company’s Series B Preferred Stock, and a Warrant to purchase 1,120,000 shares of common stock as consideration for the advance agreement. The Series B Preferred Stock met the criteria for treatment as temporary equity and debt discount of $50,684 was recognized. The Warrant caused a recognition of $100,194 in debt discount. Total debt discount recognized was $179,878, to be amortized over the term of the loan, $44,845 was recognized as interest expense as of September 30, 2022 from amortization of discounts. The Company defaulted on the weekly payment terms of the note; however, the note holder granted a limited waiver of the default. Under the waiver amendment (see Note 11), the default interest rate still applies and now the note accrues interest of 22%, and the payments are due upon the notes maturity. Total accrued interest at June 30, 2023 and September 30, 2022 was $47,781 and $10,923, respectively.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

On April 28, 2023, Howco executed a sale of receivables agreement with Itria Ventures LLC (“Itria Ventures”), Itria funded $125,000, which included fees of $6,750 withheld for a net payment to Howco of $118,250. Itria will withdraw weekly repayments of $3,255.21 for 48 weeks. The total repayments is $156,250, including interest totaling $31,250. The Company recognized a total of $38,000 of debt discount related to this agreement to be amortized over the term of the receivable agreement. During the nine months ended June 30, 2023, the Company repaid $26,042. As of June 30, 2023, loan balance to Itria amounted to $99,117, net of unamortized debt discount of $31,091.

NOTE 11 - SERIES B AND SERIES C PREFERRED STOCK

Temporary Equity – Convertible Series B Preferred Stock

On July 1, 2022, the Company’s Board of Directors designated as Series B Preferred Stock and authorized 1,000,000 shares which will not be subject to increase without the consent of the holders (each a “Holder” and collectively, the “Holders”) of a majority of the outstanding shares of Series B Preferred Stock. The designations, powers, preferences, rights and restrictions granted or imposed upon the Series B Preferred Stock are as set forth in the Certificate of Designation filed in the State of Delaware. Each share of Series B Preferred Stock shall have an initial stated value of $1.00 (the “Stated Value”). The Series B Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s common stock and (b) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company and existing and outstanding preferred stock of the Company.

Series B Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote, with the exception to matters that would change the number or features of the Series B Preferred Stock.

Each share of Series B Preferred Stock will carry an annual dividend in the amount of twelve percent (12%) of the Stated Value (the “Divided Rate”), which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an Event of Default, the Dividend Rate shall automatically increase to twenty two percent (22%).

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Unaudited)

Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon any Deemed Liquidation Event, after payment or provision for payment of debts and other liabilities of the Company, and after payment or provision for any liquidation preference payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series B Preferred Stock, if any, but prior to any distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to the Series B Preferred Stock by reason of their ownership thereof, the Holders will be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount with respect to each share of Series B Preferred Stock equal to (i) the Stated Value plus (ii) any accrued but unpaid dividends, the Default Adjustment, if applicable, Failure to Deliver Fees, if any, (the amounts in this clause (ii) collectively, the “Adjustment Amount”).

Conversion Right. At any time following the date which is one hundred eighty (180) days after the Issuance Date, the Holder shall have the right at any time, to convert all or any part of the outstanding Series B Preferred Stock into fully paid and non-assessable shares of Common Stock. The Holders of the Series B Preferred Stock are limited to holding no more than 9.99% of the Common Stock.

Conversion Price. The conversion price (the “Conversion Price”) shall equal the Fixed Conversion Price (subject to equitable adjustments by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Fixed Conversion Price” shall mean $0.20. Notwithstanding anything contained herein to the contrary in the Event of Default, the Conversion Price shall be the lower of the Fixed Conversion Price and the Variable Conversion Price. The “Variable Conversion Price” shall mean 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price” means the lowest bid price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

The Company will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Series B Preferred Stock issued. The Company is required at all times to have authorized and reserved four times the number of shares that would be issuable upon full conversion of the Series B Preferred, at any time the Company does not maintain the required Reserved Amount, the Company shall be put on notice by the Holder, and shall have five (5) days to cure its deficiency, after which time, such failure will be deemed an Event of Default hereunder.

During July 2022, the Company issued 448,000 shares of the Series B Preferred Stock in conjunction with a debt financing with two investors (See Note 9). The Company determined that under ASC 480, the Series B Preferred Stock should be treated as Temporary Equity and that it needed to apply the SAB topic 3c (SEC guidance) as well. Upon issuance of the shares, the Company allocated a relative value of $101,368 to the Preferred Stock. Upon issuance, the Company recorded an aggregate value of $461,440, with $360,072 charged to additional paid in capital including the dividends due of $13,440 at September 30, 2022.

The Company breached its covenants in the Convertible Series B Preferred Stock in July 2022. The breached covenant defines as an event of default as any breach of a material covenant or material terms or conditions contained in the Certificate of Designations or in any purchase agreement, subscription agreement or other agreement with any Holder (of the Convertible Series B Preferred Stock). As a result of this event of default, the Stated Value of the preferred stock increased to $1.50 per share and the conversion price became the “the lower of the Fixed Conversion Price ($0.2) or 50% of the lowest closing bid price of the Company’s stock in the twenty days prior to a conversion”. The Preferred Stock’s redemption value was increased by another $224,000 as a result of the default and dividends are now accruing at 22%.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

Company will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Series B Preferred Stock issued. The Company is required at all times to have authorized and reserved four times the number of shares that would be issuable upon full conversion of the Series B Preferred, at any time the Company does not maintain the required Reserved Amount, the Company shall be put on notice by the Holder, and shall have five (5) days to cure its deficiency, after which time, such failure will be deemed an Event of Default hereunder.

During July 2022, the Company issued 448,000 shares of the Series B Preferred Stock in conjunction with a debt financing with two investors (See Note 10). The Company determined that under ASC 480, the Series B Preferred Stock should be treated as Temporary Equity and that it needed to apply the SAB topic 3c (SEC guidance) as well. Upon issuance of the shares, the Company allocated a relative value of $101,368 to the Preferred Stock. Upon issuance, the Company recorded an aggregate value of $461,440, with $360,072 charged to additional paid in capital including the dividends due of $13,440 at September 30, 2022.

On April 18, 2023, the Company and the Holder of 224,000 Series B Preferred Stock (the “Holder”) entered into an Exchange Agreement whereby the Holder exchanged (the “Exchange”) 224,000 Series B Preferred Stock of the Company for 224,000 Series C Preferred Stock of the Company which shall have the rights and preferences in the Certificate of Designation of the Series C Preferred Stock as discussed below and for no other consideration.

AtBetween August ~~June 30,~~ 2023, ~~there~~to ~~remains~~September ~~224~~2023,~~000~~ ~~outstanding Convertible~~the ~~Series~~Company Bissued ~~Preferred Stock with stated value of $1.50 and would convert into 922~~2,~~128~~309,~~000~~360 ~~common~~ shares. ~~During~~of ~~the~~common ~~nine~~stock ~~months ended~~to ~~June~~JP ~~30,~~Carey ~~2023,~~Limited ~~the Company charged an additional $111~~Partners,~~623~~ toLP ~~additional paid in capital~~ for the ~~dividend~~ conversion of ~~the preferred shares. At June 30~~15,500 ~~2023, the~~ Series B Preferred Stock ~~redemption~~and ~~value amounted to~~ $~~461~~3,~~064~~640 ~~(including~~accrued dividends ~~of $125,063)~~.

In December 2023, the Company issued 932,727 shares of common stock to JP Carey Limited Partners, LP for the conversion of 2,850 Series B Preferred Stock and $855 accrued dividends.

At September 30, 2023, there remains 208,500 outstanding Convertible Series B Preferred Stock with stated value of $1.50. At September 30, 2023, the Series B Preferred Stock redemption value amounted to $463,962 (including dividends of $151,211). At December 31, 2023, there remains 205,650 outstanding Convertible Series B Preferred Stock with stated value of $1.50 and would convert into 321,020,000 common shares. During the three months ended December 31, 2023, the Company charged an additional $22,699 to additional paid in capital for the dividend of the preferred shares. At December 31, 2023, the Series B Preferred Stock redemption value amounted to $481,530 (including dividends of $173,055).

Mandatory Redeemable Series C Preferred Stock

Certificate of Designation of Series C 3% Preferred Stock

On April 25, 2023, the Company filed a Certificate of Designation for Series C Preferred Stock with the Delaware Secretary of State, designating 1,000,000 shares of preferred stock as Series C Preferred Stock. Each share of Series C Preferred Stock has a par value of $0.0001 per share and a stated value of $1.00 (the “Stated Value”). The Series C Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote.

Each share of Series C Preferred Stock is entitled to an annual dividend equal to 3% of the stated value which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an event of default, the dividend rate shall automatically increase to 18%.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or upon any deemed liquidation event, after payment or provision for payment of debts and other liabilities of the Company and after payment or provision for ay liquidation preference payable to the holders of any preferred stock ranking senior upon liquidation to the Series C Preferred Stock, if any, but prior to any distribution or payment made to the holders of common stock or the holders of the preferred stock ranking junior upon liquidation to the Series C Preferred Stock, the holders will be entitled to be paid out of the assets of the Company available for distribution an amount equal to the stated value plus any accrued but unpaid dividends, default adjustment, if applicable, and any other fees (collectively the “Adjustment Amount”).

The Holder shall have no right at any time to convert all or any part of the outstanding Series C Preferred Stock into shares of common stock.

Mandatory Redemption by the Company. On the date which is the earlier of: (i) December 31, 2023; and (ii) upon the occurrence of an Event of Default (i) or (ii), the Mandatory Redemption Date (December 31, 2023), the Company shall redeem all of the shares of Series C Preferred Stock of the Holders. Within five (5) days of the Mandatory Redemption Date, the Company shall make payment to each Holder of an amount in cash, or kind, equal to (i) the total number of Series C Preferred Stock held by the applicable Holder, multiplied by (ii) the then current Stated Value (including but not limited to the addition of any accrued, unpaid dividends and the Default Adjustment, if applicable) (the “Mandatory Redemption Amount”). The value of any payment in kind shall be as agreed between the Company and respective the Holder.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

The Holder shall have no right at any time to convert all or any part of the outstanding Series C Preferred Stock into shares of common stock.

Mandatory Redemption by the Company. On the date which is the earlier of: (i) December 31, 2023; and (ii) upon the occurrence of an Event of Default (i) or (ii), the Mandatory Redemption Date the Company shall redeem all of the shares of Series C Preferred Stock of the Holders. Within five (5) days of the Mandatory Redemption Date, the Company shall make payment to each Holder of an amount in cash, or kind, equal to (i) the total number of Series C Preferred Stock held by the applicable Holder, multiplied by (ii) the then current Stated Value (including but not limited to the addition of any accrued, unpaid dividends and the Default Adjustment, if applicable) (the “Mandatory Redemption Amount”). The value of any payment in kind shall be as agreed between the Company and respective the Holder.

Upon the occurrence and during the continuation of any Event of Default (other than as set forth in Section 8ai of the amendment which is the failure to redeem), the Stated Value shall immediately be increased to $1.50 per share of Series C Preferred Stock; and upon the occurrence and during the continuation of any Event of Default specified in Section 8ai which is the failure to redeem, the Stated Value shall immediately be increased to $2.00 per share of Series C Preferred Stock (the amounts referred to herein shall be referred to collectively as the “Default Adjustment”). In the event of a Default Adjustment, the Company shall immediately, upon the demand of the Majority Holders, redeem the issued and outstanding Series C Preferred Stock and pay to the Holders the amount which is equal to (i) the number of shares of Series C Preferred Stock held by such Holders multiplied by (ii) the Stated Value plus any Adjustment Amount. Upon any Event of Default set forth in Section 8(A)(ix), provided that there is no other default, no Default Adjustment shall occur; however, the Company shall immediately, upon the demand of the Majority Holders, redeem the issued and outstanding Series C Preferred Stock and pay to the Holders the amount which is equal to (i) the number of shares of Series C Preferred Stock held by such Holders multiplied by (ii) the Stated Value plus any Adjustment Amount.

ASC 480, Distinguishing Liabilities from Equity, defines mandatorily redeemable financial instruments as any financial instruments issued in the form of shares that have an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event that is certain to occur. A mandatorily redeemable financial instrument shall be classified as a liability unless the redemption is required to occur only upon the liquidation or termination of the reporting entity. Under ASC 480, mandatorily redeemable financial instruments shall be measured initially at fair value. Due to the mandatory redemption feature, ASC 480 requires that these Series C Preferred Stock be classified as a liability rather than as a component of equity, with preferred annual returns being accrued and recorded as interest expense.

As a result of the Exchange of 224,000 ~~shares~~ shares of Convertible Series B Preferred Stock for Series C Preferred Stock on April 18, 2023 (see above), there were 224,000 shares of Series C Preferred Stock issued and outstanding as of ~~June~~September 30, 2023 and December 31, 2023. The Series C preferred shares are mandatorily redeemable by the Company and are therefore classified as a liability for $336,000 (based on the $1.50 stated value) as reflected in ~~the~~ the unaudited condensed consolidated balance sheet as of ~~June~~September 30, 2023 and December 31, 2023. There was no gain or loss recognized in connection with the Exchange Agreement.

21At December 31, 2023 and September 30, 2023, the Series C Preferred Stock redemption value amounted to $343,147 (including dividends of $7,147) and $340,572 (including dividends of $4,572), respectively.

~~BANTEC,~~NOTE ~~INC.~~11 ~~AND~~- ~~SUBSIDIARIES~~STOCKHOLDERS’ DEFICIT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

NOTE 12 - STOCKHOLDERS’ DEFICIT

Preferred Stock

As of ~~June~~December 3031, 2023, the Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred stock, with designations, voting, and other rights and preferences to be determined by the Board of Directors of which 2,999,750 remain available for designation and issuance.

As of ~~June~~December 3031, 2023 and September 30, ~~2022~~2023, ~~the~~ the Company has designated 250 shares of $0.0001 par value Series A preferred stock, of which 250 shares are issued and outstanding. These preferred shares have voting rights per shareholder equal to the total number of issued and outstanding shares of common stock divided by 0.99.

See Note 1110, regarding the issuance of Series B and Series C Preferred Stock and the related designations.

Common Stock

As of ~~June~~December 3031, 2023 and September 30, ~~2022~~2023, ~~there~~ there were 610,~~994~~239,~~378~~681 and 49,~~407~~306,~~321~~954, shares outstanding, respectively.

Reverse Stock Split

On July 11, 2023, the Company filed a certificate of amendment to its certificate of incorporation, as amended, to effect a one-for-one thousand (1:1,000) Reverse Stock Split, effective as of July 17, 2023. Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.

~~Stock Incentive Plan~~21

The Company established its 2016 Stock Incentive Plan (the “Plan”) that permits the granting of incentive stock options and other common stock awards. The maximum number of shares available under the Plan is 100 shares. The Plan is open to all employees, officers, directors, and non-employees of the Company. Options granted under the Plan will terminate and may no longer be exercised (i) immediately upon termination of an employee or consultant for cause or (ii) one year after termination of employment, but not later than the remaining term of the option. As of June 30, 2023, 84 awards remain available for grant under the Plan.

S-1 Offerings

On September 16, 2022, the Company filed a registration statement on Form S-1. The registration statement became effective on September 29, 2022. The offering provided for the issuance of up to 5,000,000 shares of common stock at a price of $0.20, under subscriptions. The Company used the proceeds for working capital.

During the nine months ending June 30, 2023, the Company issued 496,667 shares of common stock under the September 16, 2022 S-1 offering and received $99,333.

Shares Issued for Conversion of Convertible Notes

In total 2,090,007 shares of common stock were issued upon conversion of convertible notes and accrued interest during the nine months ended June 30, 2023 as follows:

On October 3, 2022, the Company issued 191,827 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable dated March 1, 2022, all principal of $15,000 and accrued interest of $888 were converted.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

OnStock ~~November~~Incentive 17, 2022, the Company issued 384,804 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable dated April 1, 2022, all principal of $15,000 and accrued interest of $945 were converted.Plan

OnThe ~~December~~Company 1,established ~~2022,~~its 2016 Stock Incentive Plan (the ~~Company~~“Plan”) ~~issued~~that ~~383,489 shares~~permits the granting of incentive stock options and other common stock inawards. ~~conversion~~The maximum number of shares ~~Frondeur~~available ~~Partners~~under ~~LLC,~~the ~~convertible~~Plan ~~note~~is ~~payable~~100 ~~dated~~shares. ~~May~~The 1Plan is open to all employees, ~~2022~~officers, ~~all~~directors, ~~principal~~and non-employees of ~~$15,000~~the Company. Options granted under the Plan will terminate and may no longer be exercised (i) immediately upon termination of an employee or consultant ~~accrued~~for ~~interest~~cause or (ii) one year after termination of ~~$879~~employment, ~~were~~but ~~converted~~not later than the remaining term of the option. As of December 31, 2023, 84 awards remain available for grant under the Plan.

~~On January 11, 2023, the Company issued 384,311~~Equity ~~shares~~Financing ofAgreement ~~common~~with ~~stock~~GHS ~~in conversion of Frondeur Partners LLC~~Investments, ~~convertible note payable dated June 1, 2022, all principal of $15,000 and accrued interest of $921 were converted.~~LLC

On ~~February 1~~October 5, 2023, the Company ~~issued~~entered ~~372,911 shares~~into ofan ~~common~~Equity ~~stock~~Financing inAgreement ~~conversion~~(the of“Equity ~~Frondeur~~Financing ~~Partners~~Agreement”) with GHS Investments, LLC, ~~convertible~~a ~~note~~Nevada ~~payable~~limited ~~dated~~liability ~~July~~company 1(“GHS”). Under the terms of the Equity Financing Agreement, ~~2022~~GHS will purchase, at ~~all~~the ~~principal~~Company’s ofelection, up to $1510,000,000 of ~~and accrued~~the ~~interest~~Company’s ofregistered ~~$884~~common ~~were~~stock ~~converted~~(the “Shares”).

OnDuring ~~March~~the term 1,of ~~2023~~the Equity Financing Agreement, the Company ~~issued~~may ~~372,665~~at ~~shares~~any time deliver a “put notice” to GHS thereby requiring GHS to ofpurchase ~~common~~a ~~stock~~certain indollar ~~conversion~~amount of ~~Frondeur~~the ~~Partners~~Shares. ~~LLC,~~Simultaneous ~~convertible~~with ~~note~~the ~~payable~~delivery ~~dated~~of ~~August~~such 1Shares, ~~2022~~GHS shall deliver payment for the Shares. Subject to certain restrictions, ~~all~~the ~~principal~~purchase price for the Shares shall be equal to 80% of ~~$15~~the Market Price during the Pricing Period as such capitalized terms are defined in the Agreement. Following an up-list to the NASDAQ or an equivalent national exchange by the Company,~~000~~ the ~~and~~Purchase ~~accrued~~price shall mean ninety percent (90%) of the lowest volume weighted average price (“VWAP”) during the relevant ~~interest~~Pricing Period, subject to a floor of $~~871~~0.0135 per ~~were~~share, ~~converted~~below which the Company shall not deliver a Put.

~~$90,000~~The number of ~~put~~Shares ~~premiums~~sold ~~(related~~ to GHS shall not exceed the ~~Stock~~number of such shares that, when aggregated with all other shares of common stock of the Company ~~Settled~~then ~~Debt~~beneficially ~~treatment~~owned by GHS, would result in GHS owning more than 4.99% of all of the ~~conversions~~Company’s ~~listed~~common ~~above)~~stock ~~was~~then ~~reclassified~~outstanding. Additionally, toGHS ~~additional~~may ~~paid~~not inexecute ~~during~~any short sales of the ~~nine~~Company’s ~~months~~common ~~ended~~stock. ~~June~~Further, 30the Company has the right, ~~2023~~but never the obligation to draw down. No shares have been sold as of the date of this report.

The Equity Financing Agreement shall terminate (i) on the date on which GHS shall have purchased Shares pursuant to the Equity Financing Agreement for an aggregate Purchase Price of $10,000,000, or (ii) on the date occurring 24 months from the date on which the Equity Financing Agreement was executed and delivered by the Company and GHS.

As a condition for the execution of the Equity Financing Agreement by GHS, the Company is obligated to issue $20,000 worth of shares to GHS (“Commitment Shares”). These shares have not been issued as of the date of filing of this report.

Stock Options

The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period.

There were no options granted under the 2016 Stock Incentive Plan for the ~~nine~~three months ended ~~June~~December 3031, 2023 and 2022.

For the ~~nine~~three months ended ~~June~~December 3031, 2023 ~~and 2022~~, ~~the~~a ~~Company~~summary ~~recorded $0 and $69,108~~ of ~~compensation~~the ~~and~~Company’s ~~consulting expense related to~~ stock options, ~~respectively.~~activity ~~Total~~is ~~unrecognized compensation~~as ~~was $0, at June 30, 2023 and September 30, 2022.~~follows:

For the nine months ended June 30, 2023, a summary of the Company’s stock options activity is as follows:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Weighted- Average Grant-Date Fair Value		Aggregate Intrinsic Value
Outstanding at September 30, 2023		16	$	220,000		0.97	$	-	$	-
Outstanding and Exercisable at December 31, 2023		16	$	220,000		0.72	$	-	$	-

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Weighted- Average Grant-Date Fair Value		Aggregate Intrinsic Value
Outstanding at September 30, 2022		16	$	220,000		1.97	$	-	$	-
Outstanding and Exercisable at June 30, 2023		16	$	220,000		1.22	$	-	$	-

All options were issued at an options price equal to the market price of the shares on the date of the grant.

2322

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

Warrants

For the ~~nine~~three months ended ~~June~~December 3031, 2023, a summary of the Company’s warrant activity is as follows:

	Number of Warrants		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Weighted- Average Grant-Date Fair Value		Aggregate Intrinsic Value
Outstanding and exercisable at September 30, 2022		2,240,000	$	0.20		6.75	$	0.20	$	448,000
Outstanding and exercisable at September 30, 2023		2,240,000	$	0.20		5.50	$	0.20	$	-
Outstanding and exercisable at June 30, 2023		2,240,000	$	0.20		6.00	$	0.20	$	-
Outstanding and exercisable at December 31, 2023		2,240,000	$	0.20		5.25	$	0.20	$	-

There were no new warrants issued during the ~~nine~~three months ended ~~June~~December 3031, 2023.

NOTE 12 13 - ~~DEFINED~~RELATED ~~CONTRIBUTION PLANS~~PARTY TRANSACTIONS

~~The~~On October 1, 2016, the Company entered into employment agreements with the Company’s ~~subsidiary~~President and CEO which provides for annual base compensation of $370,000 ~~Howco~~for a period of three years, which iscan, at the ~~sponsor~~ ofCompany’s aelection, ~~qualified~~be ~~401(k)~~paid ~~plan~~in ~~with~~cash or Common Stock or deferred if insufficient cash is available, and provides for other benefits, including a ~~safe~~discretionary ~~harbor~~bonus and equity provision. ~~All~~for ~~employees~~the ~~are~~equivalent ~~eligible~~of to12 ~~enter~~months’ ~~the~~base ~~plan~~salary, ~~within~~and an additional one-time ~~year~~severance payment of $2,500,000 upon termination under certain circumstances, as defined in the ~~commencement~~agreement. On September 16, 2019, ofthis employment. ~~Employer~~agreement ~~contributions~~was ~~charged~~modified for a period of five years to ~~expense~~provide an annual salary of $624,000 along with the aforementioned benefits including education reimbursement. The Company recognized expenses of $156,000 for the ~~nine~~three months ended ~~June~~December 3031, 2023 and 2022 ~~were~~for ~~$3,126~~the ~~and~~CEO’s ~~$4,502,~~base ~~respectively~~compensation.

~~NOTE~~The Company had certain promissory notes payable 14to -related ~~RELATED~~parties ~~PARTY~~(see ~~TRANSACTIONS~~Note 7).

OnNOTE ~~October~~13 1, 2016, the Company entered into employment agreements with the Company’s President and CEO which provides for annual base compensation of $370,000 for a period of three years, which can, at the Company’s election, be paid in cash or Common Stock or deferred if insufficient cash is available, and provides for other benefits, including a discretionary bonus and equity provision for the equivalent of 12 months’ base salary, and an additional one-~~time~~ ~~severance payment of $2,500,000 upon termination under certain circumstances, as defined in the agreement. On September 16, 2019,~~COMMITMENTS ~~this~~AND employment agreement was modified for a period of five years to provide an annual salary of $624,000 along with the aforementioned benefits including education reimbursement. The Company recognized expenses of $468,000 for the nine months ended June 30, 2023 and 2022 for the CEO’s base compensation.CONTINGENCIES

The Company had certain promissory notes payable to related parties (see Note 8).

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Contingencies

Legal Matters

On February 6, 2018, the Company sent a letter to the previous owners of Howco Distributing Co. (“Howco”) alleging that they made certain financial misrepresentations under the terms of the Stock Purchase Agreement by which the Company acquired control of Howco during 2016. The Company claimed that the previous owners took excessive amounts of cash from the business prior to the close of the merger. On March 13, 2018, the Company filed a lawsuit against the previous owners by issuing a summons. On April 12, 2018, the Company received the Defendants’ answer. On July 22, 2019, the Company sought and was granted a dismissal without prejudice of the lawsuit filed against the previous owners of Howco. A company representative and the previous owners have been in contact. An informal oral agreement with the Seller was made whereby the Company had been paying the previous owners $3,000 per month. The Company is no longer paying the previous owner $3,000 a month. A company representative informed the previous owner that the Company will resume the $3,000 payment as soon as it is able to do so (see Note 76).

24In connection with the merger in fiscal 2016, with Texas Wyoming Drilling, Inc., a vendor has a claim for unpaid bills of approximately $75,000 against the Company. The Company and its legal counsel believe the Company is not liable for the claim pursuant to its indemnification clause in the merger agreement.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

In connection with the merger in fiscal 2016, with Texas Wyoming Drilling, Inc., a vendor has a claim for unpaid bills of approximately $75,000 against the Company. The Company and its legal counsel believe the Company is not liable for the claim pursuant to its indemnification clause in the merger agreement.

In the suit Drone USA, Inc and Michael Bannon (plaintiffs) vs the former Chief Financial Officer or CFO, currently pending in New York State court, the plaintiffs sought to compel the former CFO to meet his obligations under an agreement guaranteeing payments to another former executive. The former CFO filed a cross-claim against the plaintiffs for past due salary. The employment agreement with the former CFO allowed salary payments to be paid in cash or stock. During the year ended September 30, 2021, the Company issued 36,821 shares of its common stock for the past due salary and claims that this payment moots the former CFO’s claim for past due salary. During the year ended September 30, 2022, the Company began the process to cancel the shares issued and reclassified the amount to equity and a previously recorded liability for $119,670 remains which is included in the settlement payable balance at June 30, 2023. The former CFO filed a motion for summary judgement which was denied, then filed an appeal to that order. The appellate court reversed the lower court’s decision. The Company settled the lawsuit for $90,000. Three equal payments of $30,000 were required to be made. As of the date of filing this Form 10-Q, all payments have been made and the matter has been concluded (see Note 6).

During the year ended September 30, 2019, two vendors (The Equity Group and Toppan Vintage) have asserted claims for past due amounts of approximately $59,000, arising from services provided. The Company has fully recognized in accounts payable the amounts associated with these claims.

On December 30, 2020, a Howco vendor filed a lawsuit seeking payment of past due invoices totaling $276,430 and finance charges of $40,212. The Company has recorded the liability for the invoices in the normal course of business. Management at Howco as well as an intermediary consultant structured a repayment plan with this vender and other venders as well.

Settlements

On ~~January~~November 2913, 2018, the Company ~~entered into a settlement agreement~~ and ~~mutual release with~~ a vendor ~~who~~agreed ~~had~~to ~~provided~~settle ~~public~~$161,700 in ~~relations~~past ~~and~~due ~~other~~professional ~~consulting~~fees ~~services~~for ~~whereby~~a ~~the~~convertible ~~Company shall~~note ~~pay~~in tothe ~~this vendor an aggregate~~ amount of $6090,000 ~~of which $30,000 was paid on February 2, 2018~~. The ~~Company~~note ~~was~~bears tointerest ~~have~~at ~~paid~~5% ~~ten monthly~~and ~~payments~~matures ofin $3July 2019,~~000~~ and ~~per~~has ~~month~~a ~~beginning~~fixed ondiscount ~~February~~conversion ~~29, 2018~~feature. The ~~vendor~~note is tonow ~~return~~past 1due ~~common~~and ~~share~~remains ofunconverted ~~the~~at ~~Company’s~~December ~~common stock~~31, ~~which~~2023 ~~will~~and beSeptember ~~cancelled~~30, ~~upon~~2023; however ~~satisfaction~~there ~~of the liability. The liability~~ is ~~recorded~~no atdefault ~~$21,000~~interest asor ofpenalty ~~June~~associated ~~30,~~with ~~2023,~~the ~~and September 30, 2022~~default.

On ~~November~~June 1323, ~~2018~~2023, ~~the~~Howco ~~Company~~entered ~~and~~into a ~~vendor~~settlement ~~agreed~~agreement towith ~~settle~~Crane ~~$161,700~~Machinery inInc. ~~past~~(CMI). ~~due~~Howco ~~professional~~agreed ~~fees~~to ~~for~~pay a$16,500 ~~convertible~~with ~~note~~an ininitial ~~the~~settlement ~~amount~~ of $902,000., ~~The~~to ~~note~~be ~~bears~~followed ~~interest~~by atfive 5%monthly ~~and~~installments ~~matures~~of ~~in July 2019~~$2,900, ~~and~~until ~~has~~paid ain ~~fixed discount conversion feature~~full. ~~The~~As ~~note~~of isDecember ~~now past due and remains unconverted at June 30~~31, 2023 ~~and September 30~~, ~~2022; however there is no default interest or penalty associated with~~ the ~~default. The difference between the~~ settlement ~~amount~~ ~~and the recorded~~ amount inhas ~~accounts~~been ~~payable~~fully ~~of $71,700 was recognized as a gain on debt extinguishment upon receipt of the waiver and release from the vendor in 2018~~paid.

25As of December 31, 2023, the Company has received demand for payment of past due amounts for services by several consultants and service providers.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

On June 23, 2023, Howco entered into a settlement agreement with Crane Machinery Inc. (CMI). Howco agreed to pay $16,500 with an initial settlement of $2,000, to be followed by five monthly installments of $2,900, until paid in full.

As of June 30, 2023, the Company has received demand for payment of past due amounts for services by several consultants and service providers.

Commitments

Lease Obligations

The Company entered into an agreement with a manufacturer in Pismo Beach, California. The agreement provides for certain services to be provided by the manufacturer as needed by the Company. The agreement has an initial term of three years with one year renewals. In connection with this agreement, the Company has agreed to sublease space based in San Luis Obispo, California from the manufacturer for the purposes of the development and manufacturing of unmanned aerial vehicles. The lease provides for base monthly rent of approximately $15,000 for the initial term to be increased to $16,500 per month upon extension. The lease term begins February 1, 2017 and expires January 31, 2019 with the option to extend the term an additional 24 months. However, the Company never took possession of the premises and in July 2017, the Company made a decision to not take possession of the premises. The Company is in default of the rent payments and had received oral demand for payments. As of June 30, 2023 and September 30, 2022, the Company has not made any of the required monthly rent payments in connection with this agreement. During fiscal 2017, the Company had expensed and accrued into accounts payable the remaining amounts due under the term of the lease for a total accrual of $360,000 pursuant to ASC 420-10-30. This balance remains accrued as of June 30, 2023 and September 30, 2022.

On April 16, 2020 the Company’s subsidiary Howco renewed its office and warehouse lease in Vancouver, WA for a term commencing on June 1, 2020 extending through June 1, 2023 at an initial monthly rent of approximately $5,154. The lease requires monthly payments including base rent plus CAM with annual increases.

On April 16, 2023, Howco renewed its office and warehouse lease for an additional three years. The initial year (commencing on June 1, 2023) monthly lease payment is $4,542, in years two and three the monthly lease payments are $4,679 and $4,819 respectively. Monthly common charges at $1,481 for the first year, subject to change in years two and three.

The Company recognized a right-of-use asset of and a lease liability of $140,~~561,~~561in ~~which~~fiscal 2023 and represents the fair value of the lease payments calculated as present value of the minimum lease ~~payments~~ payments using a discount rate of 12% on date of the lease renewal in accordance with ASC 842. The asset and liability will be amortized as monthly payments are made and lease expense will be recognized on a straight-line basis over the term of the lease.

Right of use asset (ROU) is summarized below:

	June 30, 2023			September 30, 2022
	December 31, 2023			September 30, 2023
Operating lease at inception	$	140,561		$	~~156~~140,~~554~~561
Less accumulated reduction		(-23,588	)		(~~122~~13,~~986~~285	)
Balance ROU asset	$	~~140~~116,~~561~~973		$	33127,~~568~~276

Operating lease liability related to the ROU asset is summarized below:

Operating lease liabilities at inception	$	140,561		$	~~156~~140,~~554~~561
Reduction of lease liabilities		(-22,624	)		(~~122~~12,~~079~~735	)
Total lease liabilities	$	~~140~~117,~~561~~937		$	34127,~~475~~826
Less: current portion		(4043,~~311~~630	)		-(41,946	)
Lease liabilities, non-current	$	~~100~~74,~~250~~307		$	-85,880

2624

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

Non-cancellable operating lease total future payments are summarized below:

Total minimum operating lease payments	$	~~167~~136,~~061~~673		$	42150,~~929~~298
Less discount to fair value		(2618,~~500~~736	)		(822,~~454~~472	)
Total lease liability	$	~~140~~117,~~561~~937		$	34127,~~475~~826

Future minimum lease payments under non-cancellable operating leases at ~~June~~December 3031, 2023 are as follows:

Years ending September 30,	Amount
2024	$	31,277
2024 (remainder)	$	41,424
2025		56,~~279~~701
2026		5338,~~005~~548
Total minimum non-cancelable operating lease payments	$	~~140~~136,~~561~~673

The weighted average remaining lease term for the operating lease is 2.9242 years as of ~~June~~December 3031, 2023.

In December 2019, the Company relocated its primary office to 195 Paterson Avenue, Little Falls, New Jersey, under a one-year lease with a renewal option having monthly payments of $500. ~~Following~~ ~~subsequent~~On ~~renewals~~April 30, 2023, the Company ~~current~~ended ~~rent~~its islease ~~$700,~~at ~~per~~195 ~~month~~Paterson asAvenue ofLittle ~~June~~Falls, 30NJ. On May 9, 2023, the Company signed an application to deliver its mail at 37 Main Street, Sparta, NJ for $79 per month.

For the ~~nine~~three months ended ~~June~~December 3031, 2023 and 2022, rent expense for all leases amounted to $5718,~~356~~719 and $5319,~~855~~562, respectively.

~~Notice~~NOTE of14 ~~Default~~- CONCENTRATIONS

On September 6, 2019, the Company received a notice of default under its senior secured credit facility with TCA, for non-payment of amounts due among other matters. Left uncured the default remedies include seizure of operating assets such as the Company’s subsidiary. Additionally, the default may trigger cross default provisions under other agreements with other creditors (see Note 9).

Directors’ & Officers’ Insurance Policy Expiration

On October 11, 2019, the Company’s insurance policy covering directors and officers expired and the carrier declined to renew the policy. The Company is working with its broker and other carriers to obtain coverage. This lapse of insurance coverage exposes the Company to the risk associated with its indemnification of its officers against legal actions by third parties as outlined in the officers’ employment agreements as amended on September 16, 2019.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

NOTE 16 - CONCENTRATIONS

Concentration of Credit Risk

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $250,000. At ~~June~~December 3031, 2023, cash in a bank did not exceed ~~the~~ the federally insured limits. The Company has not experienced any losses in such accounts through ~~June~~December 3031, 2023.

Economic Concentrations

With respect to customer concentration, ~~one~~two ~~customer~~customers accounted for approximately 8583% and 11% of total sales for the ~~nine~~three months ended ~~June~~December 3031, 2023. ~~One~~With respect to customer concentration, one customer accounted for approximately 8091% of total sales for the ~~nine~~three months ended ~~June 30~~December 31, 2022.

With respect to accounts receivable concentration, three customers accounted for 7362%, 1324% and 1112% of total accounts receivable at ~~June~~December 3031, 2023. ~~Three~~With respect to accounts receivable concentration, two customers accounted for ~~approximately 50~~88%, ~~23%~~ and 1510% of total accounts receivable at September 30, ~~2022~~2023.

With respect to supplier concentrations, ~~one supplier~~three suppliers accounted for approximately 14%, 13% and 12% of total purchases for the ~~nine~~three months ended ~~June~~December 3031, 2023. ~~Three~~With respect to supplier concentration, three suppliers accounted for approximately 21 20%, 1113% and 1011% of total purchases for the ~~nine~~three months ended ~~June 30~~December 31, 2022.

With respect to Howco accounts payable concentration, ~~two~~three suppliers accounted for approximately 1510%, 17%, and 1319% of total accounts payable at ~~June~~December 3031, 2023. ~~Three~~With respect to Howco accounts payable concentration, three suppliers accounted for approximately 27 11%, 2418% and 1320% of total accounts payable at September 30, ~~2022~~2023.

Foreign sales were $~~4,509 and $~~0 for the ~~nine~~ three months ended December ~~June 30~~31, 2023 and 2022, respectively.

~~NOTE 17 - SUBSEQUENT EVENTS~~25

Convertible Notes – Frondeur Partners, LLC

On July 10, 2023, the Company and Frondeur Partners LLC., signed an Omnibus Amendment to Promissory Notes dated between October 2022 and May 2023 eliminating conversion rights in each note. All other terms remain the same.

Senior Debt – TCA Global Credit Master Fund, LP

The Company previously reported that, on April 12, 2023, the receiver for TCA Global Credit Master Fund, LP (“TCA”) sold and assigned to Ekimnel Strategies, LLC, a Delaware limited liability company (“Ekimnel”), and Ekimnel purchased and assumed, all of TCA’s rights and obligations as a lender under that certain Senior Secured Credit Facility Agreement (the “Agreement”). Ekimnel is a company controlled by Michael Bannon, the Company’s Chief Executive Officer.

BANTEC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2023

(Unaudited)

~~Pursuant~~NOTE to15 ~~the~~- ~~Amendment, the~~SUBSEQUENT ~~Lender and the Credit Parties:~~EVENTS

~~(i)~~Convertible ~~combined and consolidated both the Replacement~~ Notes ~~into~~for ~~the~~Legal ~~Note;~~Services

~~(ii)~~From ~~extended~~January 1, 2024 until March 1, 2024, the ~~Maturity~~Company ~~Date~~issued $6,000 convertible notes every month to the law firm for fees incurred, each note having six-month term to maturity and 10% annual interest compounded monthly. The notes are convertible into shares of common stock at a fixed discount of 70% of the ~~Note~~lowest bid price in the 10 trading days immediately preceding the notice of conversion from the lender. The notes have cross default provisions. The Company has accounted for the convertible promissory notes as stock settled debt under ASC 480 and recorded debt premiums equal to ~~August~~the ~~12,~~face ~~2047;~~value of the notes with a charge to interest expense. The principal amount of these notes will be charged to professional fees during the month the notes were issued. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded debt premium of $7,714.

~~(iii)~~Sale lowered the interest rate on the Note to 2.0% per year, with (a) the principal and interest payments starting on August 12, 2026, and (ii) for the period commencing on August 12, 2023 and ending on August 11, 2026, interest due on the Note being added to the outstanding principal amount of ~~the~~Future ~~Note;~~Receipts Agreements

~~(iv)~~On ~~removed~~January 10, 2024, the ~~Lender~~Company’s ~~right~~subsidiary, toHowco, ~~convert~~executed a sale of future receipt agreement with Samson MCA LLC. Under the agreement, the Company’s sold ~~obligations~~$173,750 ~~under~~in ~~the~~future ~~Note~~receipt ~~into~~or ~~shares~~receivables for a purchase amount of ~~common~~$125,000. ~~stock~~The principal amount is payable in weekly installments of $8,687.50 until such time that the obligation is fully satisfied for approximately 5 months. The Company; received $121,225 (net of origination fee of $3,750 which will be amortized over term of this agreement and $125 processing fee). The Company has the option to repurchase the receipts it sold to Samson during the first month to the sixth month from the date of this agreement ranging from $147,500 to $158,750.

~~(v) made certain conforming changes to the terms of the Agreement.~~26

Convertible Notes Issued

Under the Note, the Company is required to make ten payments of $10,305.60, which includes a one-time interest charge of 14% ($12,565). The first payment is due on August 30, 2023, with nine subsequent payments due each month thereafter. The Note is not secured by any collateral. The Note matures on May 15, 2024 and contains customary events of default. Upon the occurrence and during the continuation of any such event of default, the Note will become immediately due and payable, and the Company is obligated to pay to the Lender an amount equal to 150% times the sum of (w) the then outstanding principal amount of the Note plus (x) accrued and unpaid interest on the unpaid principal amount of the Note to the date of payment plus (y) default interest at 22% per annum on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Lender pursuant to Article IV of the Note (amounts set forth in clauses (w), (x), (y) and (z) are collectively referred to as the “Default Amount”). If the Company fails to pay the Default Amount within five (5) business days of the Lender’s written notice that such amount is due and payable, then the Lender has the right to convert the balance owed pursuant to the Note, including the Default Amount, into shares of common stock of the Company (“Common Stock”) at a variable conversion price equal to 39% of the lowest closing price pe share of Common Stock during the ten trading day period ending on the latest complete trading day prior to the conversion date, provided that the Lender and its affiliates may not own greater than 4.99% of the Company’s outstanding shares of Common Stock, as set forth in the Note. The Company received funding under the Note on July 24, 2023. The Company intends to use the proceeds from the Note for general working capital purposes.

Bantec Environmental Corp.

On August 26, 2023, the Company filed incorporation documents to set up a subsidiary called Bantec Environmental Corp.

Demand and Default Letter

On July 26, 2023, the Company received a demand and default letter from Trillium Partners L.P. The letter references a document titled “Securities Purchase Agreement” dated July 2022. In the demand letter, Trillium is looking for immediate payment of $275,710.25. On August 4, 2023, the Company received a demand notification revising the demand amount to $214,563.33 with $183,259 in principal and $31,304.33 in interest and for JP Carey, a total of $270,947.95 with $224,000 in principal and $46,947.95 in accrued interest. In addition, the demand notification included outstanding fee notes for Frondeur Partners LLC, a total of $135,000 in principal and $7,903 of accrued interest. According to the demand notification, as of this day, only one note, dated October 1st, 2022, matured. A company representative is in talks with Trillium and the Company is looking to resolve the matter amicably.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results

This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects that set out anticipated results based on management’s plans, estimates and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are set forth in the “Risk Factors” section of our annual report on Form 10-K for the fiscal year ended September 30, ~~2022~~2023, as filed with the SEC on ~~January~~February 125, ~~2023~~2024.

We caution that these factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this quarterly report on Form 10-Q.

Overview

Bantec, Inc. is a product and service company targeting the U.S. Government, state governments, municipalities, hospitals, universities, manufacturers and other building owners. Bantec also provides product procurement, distribution, and logistics services through its wholly-owned subsidiary, Howco Distributing Co., (“Howco”) (collectively, the “Company”) to the United States Department of Defense and Defense Logistics Agency. The Company established Bantec Sanitizing in fiscal 2021, which offers sanitizing products and equipment through its new store bantec.store. The Company has operations based in Sparta, New Jersey and Vancouver, Washington. The Company continues to seek strategic acquisitions and partnerships that offer us an opportunity to grow sales and profit.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the ~~nine~~three months ended ~~June~~December 3031, 2023, the Company has incurred a net loss of $2476,~~255,726~~380 and used cash in operations of $~~479~~28,~~809~~135. The working capital deficit, stockholders’ deficit and accumulated deficit was $188,~~073~~422,~~165~~778, $1817,~~642~~752,~~457~~ 958 and $3738,~~885~~331,~~912~~900, respectively, at ~~June~~December 3031, 2023. The Company defaulted on its Note Payable – Seller in September 2017 and has since defaulted on other promissory notes. As of ~~June~~December 3031, 2023, the Company has received demands for payment of past due amounts from several consultants and service providers. It is the management’s opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon the management’s ability to further implement its business plan and raise additional capital as needed from the sales of stock or debt. The Company has continued to implement cost-cutting measures and restructuring or setting up payment plans with vendors and service providers and plans to raise equity through a private placement, and restructure or repay its obligations. The accompanying consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. However, additional funding may not be available to the Company on acceptable terms, or at all. Any failure to raise capital as and when needed could have a negative impact on the Company’s ability to pursue its business plans and strategies, and the Company would likely be forced to delay, reduce, or terminate some or all of its activities, all of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

3027

Liquidity and Capital Resources

As of ~~June~~December 3031, 2023 we had $~~401~~525,~~602~~402 in current assets, including $43101,~~772~~232 in cash, compared to $~~703~~367,~~917~~108 in current assets, including $~~186~~35,~~386~~443 in cash, at September 30, ~~2022~~2023. Current liabilities at ~~June 30~~December 31, 2023, totaled $188,~~474~~948,~~767~~180 compared to $168,~~504~~352,~~500~~264, at September 30, ~~2022~~2023. The ~~decrease~~increase in current assets from September 30, ~~2022~~2023 to December ~~June 30~~31, 2023 is primarily due to ~~decreases~~increases in: cash of $~~142~~65,~~614~~789, and accounts receivable of $~~151~~152,~~771~~799. The increase in current liabilities from September 30, ~~2022~~2023 to ~~June~~December 3031, 2023, of approximately $1595,~~970~~916,~~267,~~ is primarily due to the increases in: convertible notes of approximately $~~132~~67,000, notes and loans payable of $~~306~~60,000, accrued expenses and interest of approximately $1303,~~164,~~000, and related party notes of approximately $~~169~~27,000. While we ~~have~~had generated revenues from UAV sales asfrom ofthe ~~this~~prior ~~date~~year, no significant UAV revenues are anticipated until we have implemented our full plan of operations, specifically, initiating sales campaigns for our UAV internet and social media platforms. We must raise cash to implement our strategy to grow and expand per our business plan.

The following is a summary of the Company’s cash flows provided by (used in) operating, investing and financing activities:

	Nine Months Ended June 30, 2023			Nine Months Ended June 30, 2022
	For the Three Months December 31, 2023			For the Three Months December 31, 2022
Net Cash Provided by (Used in) Operating Activities	$	(479,809	)	$	(1,240,506	)
Net Cash Used in Operating Activities	$	(28,135	)	$	(133,503	)
Net Cash Provided by (Used in) Financing Activities	$	337,195		$	497,679
Net Cash Used in Investing Activities	$	(1,558	)	$	-
Net Increase (Decrease) in Cash	$	(142,614	)	$	(742,827	)
Net Cash Provided by Financing Activities	$	95,482		$	42,055
Net Increase (Decrease) in Cash	$	65,789		$	(91,488	)

For the ~~nine~~three months ended ~~June~~December 3031, 2023, ~~Net~~net cash used in operating activities of $~~479~~28,~~809~~135, is largely the result of net losses of $2476,~~255~~380,~~726,~~ partially offset by non-cash charges for premiums on stock settled debt of approximately $~~156~~24,000, debt discount amortization of $~~277~~34,000, fees notes issued of $~~156~~6,000 and increase from changes in assets and liabilities of approximately $1385,~~168,~~000 primarily due to increase in accounts payable and accrued expenses of $1476,~~107,~~000.

For the ~~nine~~three months ended ~~June~~December 3031, ~~2023~~2022, ~~Cash~~net ~~provided~~cash byused ~~financing~~in operating activities of $~~337~~133,~~195~~503, is largely the result of ~~common~~net ~~stock~~losses ~~sales for cash~~ of ~~approximately~~ $99781,~~000~~675, partially ~~loan~~offset ~~advances~~by ~~from~~non-cash ~~related~~charges ~~parties~~for premiums on stock settled debt of approximately $~~245~~57,000, ~~net~~debt ~~proceeds~~discount ~~from~~amortization ~~notes payable~~ of $~~118~~91,000, non-cash ~~partially~~charges ~~offset by~~for ~~repayments~~services of ~~various~~$57,000 ~~debts including loans~~ and ~~other~~increases ~~financing~~to ~~arrangements~~accrued atexpenses ~~Howco for a total~~ of approximately $145,000.

During the three months ended December 31, 2023, net cash used in investing activities of $1,558 which relates to purchase of equipment as compared to $0 during the three months ended December 31, 2022.

During the three months ended December 31, 2023, cash provided by financing activities of $95,482 is largely the result of loan advances from related parties of approximately $35,000, net proceeds from loans and notes payable of $172,000, net proceeds from convertible notes of $35,000, and proceeds from line of credit of $12,500 partially offset by repayments of various debts including loans and other financing arrangements at Howco for a total of approximately $151,000, and repayments on notes payable- related party of approximately $8,000.

For the three months ended December 31, 2022 cash provided by financing activities is largely the result of stock sales for cash of $99,333, somewhat offset by repayments of various debts including loans and other financing arrangements at Howco.

Refer also to the Consolidated Statements of Changes in Cash Flows included in the financial statement section of this report.

Results of Operations

Three months Ended ~~June~~December 3031, 2023 and 2022

We generated sales of $~~590~~955,~~333~~734 and $~~750~~606,~~756~~166 for the three months ended ~~June~~December 3031, 2023 and 2022, respectively, aan ~~decrease~~increase of approximately $~~160~~350,000, or 2158%. For the ~~three~~ three months ended ~~June~~December 3031, 2023 and 2022, we reported cost of goods sold of $~~489~~808,~~822~~187 and $~~629~~511,~~023~~216, respectively, aan ~~decrease~~increase of approximately $~~139~~297,000, or 2258%. The ~~decrease~~increase in sales ~~and~~is ~~cost~~primarily attributable to the increase in sales to one of our major customers. The cost of goods sold increased for the ~~2023~~three ~~period~~months ended December 31, 2023 as compared to the ~~2022~~three ~~period~~months ended December 31, 2022 is due to ~~cost cutting~~higher ~~measures~~sales weover ~~implemented~~the ~~during~~last ~~that~~three ~~period~~months. Gross margins were 1715% and 16% for the three months ended ~~June~~December 3031, 2023 and 2022, respectively.

For the three months ended ~~June~~December 3031, 2023 and 2022, we reported selling, general, and administrative expenses of $~~397~~454,~~360~~785 as compared to $~~477~~514,~~310~~290, a decrease of approximately $8060,000, or 1712%. For the three months ended ~~June~~December 3031, 2023, and 2022, selling, general, and administrative expenses consisted of the following:

	For the Three Months ended		For the Three Months ended
	June 30, 2023		June 30, 2022
	December 31, 2023		December 31, 2022
Compensation and related benefits	$	~~133~~268,~~959~~508	$	259,~~605~~982
Professional fees		~~177~~116,~~283~~504		~~159~~207,~~336~~925
Other selling, general and administrative expenses		8669,~~118~~773		5846,~~369~~383
Total selling, general and administrative expenses	$	~~397~~454,~~360~~785	$	~~477~~514,~~310~~290

The decrease in selling, general, and administrative costs for ~~the~~three ~~2023~~months ~~period~~ended December 31, 2023 as compared to the ~~2022~~three ~~period~~months ~~was~~ended December 31, 2022 was primarily attributable to the decrease in ~~compensation and~~ professional fees of approximately $91,000 due to cost cutting measures we implemented ~~during~~offset by ~~that~~increases ~~period,~~in ~~slightly~~compensation ~~offset~~of byapproximately an$9,000 and increase in other selling, general and administrative costs ~~stemming from lower levels~~ of ~~management~~approximately $24,000 ~~and~~due ~~staff~~to atincreased ~~Howco and general decreased operations (also at Howco)~~sales.

For the three months ended ~~June~~December 3031, 2023, and 2022, other expense amounted to $~~346~~169,~~534~~142 and $~~101~~362,~~680,~~335 respectively, ana ~~increase~~decrease of approximately $~~245~~193,000. The ~~increase~~decrease was attributable to ~~increased~~decreased interest expense of approximately $~~106~~193,000 ~~during~~primarily ~~the~~due ~~2023~~to ~~quarter.~~decreases ~~Additionally~~in ~~during~~amortization ~~the~~of ~~2022~~debt ~~period~~discount and ~~gains~~premiums on ~~debt~~stock ~~extinguishment~~settled debt and ~~fair~~decreased ~~market~~interest ~~value~~expense ~~changes~~on ofthe ~~derivative~~TCA ~~offset~~loan ~~other~~which ~~expenses~~was byassigned ato ~~total~~Ekimnel ofin ~~approximately~~August ~~$139,000~~2023.

As a result, we reported net loss of $~~643~~476,~~383~~380 and $~~457~~781,~~257~~675 for the three months ended ~~June~~December 3031, 2023 and 2022, respectively.

The Company has ~~incurred~~ incurred dividend charges from Series B and C preferred stock of $3425,~~931~~274 and $36,960, for the three months ended ~~June~~December 3031, 2023. and 2022, respectively. The dividends to be paid are included in temporary equity asand ~~presented~~mandatorily onredeemable ~~the~~preferred ~~balance~~stock ~~sheet.~~presented ~~There~~as ~~was~~liability noas ~~temporary equity with a related dividend in~~reflected on the ~~2022~~condensed ~~comparative~~consolidated ~~period~~balance sheet.

As a result, we reported net loss available to common stockholders of $~~678~~501,~~314~~654, or $0.1005 per common share, and $~~457~~818,~~257~~635, or $0.1215 per common share, for the three months ended ~~June~~December 3031, 2023 and 2022, respectively.

~~Nine months Ended June 30, 2023 and 2022~~29

We generated sales of $1,819,622 and $1,522,781 for the nine months ended June 30, 2023 and 2022, respectively, an increase of approximately $297,000, or 16%. For the nine months ended June 30, 2023 and 2022, we reported cost of goods sold of $1,515,984 and $1,258,376, respectively, an increase of approximately $258,000, or 17%. The increase in sales is primarily attributable to the increase in sales to one of our major customers, Defense Logistics Agency. The cost of goods sold increased for the 2023 period as compared to the 2022 period is due to higher sales over the last nine months. Gross margins were 17% and 17% for the nine months ended June 30, 2023 and 2022, respectively.

For the nine months ended June 30, 2023, and 2022, we reported selling, general, and administrative expenses of $1,393,133 as compared to $1,679,135, a decrease of approximately $286,000, or 21%. For the nine months ended June 30, 2023 and 2022, selling, general, and administrative expenses consisted of the following:

	For the Nine Months ended		For the Nine Months ended
	June 30, 2023		June 30, 2022
Compensation and related benefits	$	655,910	$	900,026
Professional fees		552,571		618,879
Other selling, general and administrative expenses		184,652		160,230
Total selling, general and administrative expenses	$	1,393,133	$	1,679,135

The decrease in selling, general, and administrative costs for the 2023 period as compared to the 2022 period was primarily attributable to decreases: in compensation of approximately $244,000 or 27% and professional services expenses of approximately $66,000 or 11% due to cost cutting measures we implemented during that period.

For the nine months ended June 30, 2023 and 2022, other expense amounted to $1,166,231 and $618,203, respectively, an increase of approximately $548,000. The increase was attributable to higher interest costs of approximately $322,000. Additionally during the 2022 period gains on debt extinguishment and fair market value changes of derivative offset other expenses by a total of approximately $226,000.

As a result, we reported net loss of $2,255,726 and $2,032,933 for the nine months ended June 30, 2023 and 2022, respectively.

The Company has incurred dividend charges from Series B preferred stock of $111,623, for the nine months ended June 30, 2023. The dividends to be paid are included in temporary equity as presented on the balance sheet. There was no temporary equity with a related dividend in the 2022 comparative period.

As a result, we reported a net loss available to common stockholders of $2,367,349 or $0.38 per common share, and $2,032,933 or $0.68 per common share, for the nine months ended June 30, 2023 and 2022, respectively.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Significant Accounting Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. In general, management’s estimates are based on historical experience, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We have identified the accounting policies below as critical to our business operations.

Accounts Receivable

Trade receivables are recorded at net realizable value consisting of the carrying amount less the allowance for doubtful accounts, as needed. Factors used to establish an allowance include the credit quality of the customer and whether the balance is significant. The Company may also use the direct write-off method to account for uncollectible accounts that are not received. Using the direct write-off method, trade receivable balances are written off to bad debt expense when an account balance is deemed to be uncollectible. The Company maintains an allowance for credit losses primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company maintains an allowance under Accounting Standards Codification (“ASC”) 326 based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions.

Long-Lived Assets

Revenue Recognition

The Company sells drones and related products manufactured by third parties to various parties, primarily local government entities. The Company also offers technical services related to drone utilization and performs other services. Contracts for drone related products and services sales will be evaluated using the five-step process outline above. There have been no material sales for drone products or other services for which full compliance with performance obligations has not been met. Upon significant sales for drone products and services and insulation jackets, the Company will disaggregate sales by these lines of business and within the lines of business to the extent that the product or service has different revenue recognition characteristics.

The Company began sales of sanitizing products and services during the year ended September 30, 2022. Revenue for this line of business is recognized upon shipment and delivery of training services (as applicable).

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires ~~recognition~~ recognition in the financial statements of the cost of employee and director services along with non-employee services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company utilizes the Black-Sholes option pricing model and uses the simplified method to determine expected term because of lack of sufficient exercise history. Additionally, effective October 1, 2016, the Company adopted the Accounting Standards Update No. 2016-09 (“ASU 2016-09”), Improvements to Employee Share-Based Payment Accounting. Among other changes, ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. The Company has elected to recognize forfeitures as they occur and the cumulative impact of this change did not have any effect on the Company’s consolidated financial statements and related disclosures.

As of October 1, 2018, the Company has adopted ASU 2018-7 Compensation-Stock Compensation which conforms the accounting for non-employees to the accounting treatment for employees. The new standard replaces using a fair value as of each reporting date with use of the calculated fair value as of the grant date. The implementation of the standard provides for the use of the fair market value as of the adoption date, rather than using the value as of the original grant date. Therefore, the values calculated and reported at September 30, 2018 become a proxy for the grant date value. The Company utilizes the Black-Sholes option pricing model and uses the simplified method to determine expected term because of lack of sufficient exercise history. There was no cumulative effect on the adoption date.

Convertible Notes with Fixed Rate Conversion Options

Net Loss Per Share

Lease Accounting

InThe ~~February~~Company ~~2016,~~follows ~~the FASB issued~~ ASU No. 2016-02, Leases, which requires lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases ~~under the prior guidance (ASC Topic 840)~~. Under the ~~new~~ guidance, codified as ASC Topic 842, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. ~~The~~ASC ~~new~~842 ~~guidance~~ further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense generally is flat (straight-line) throughout the life of the lease. For finance leases, periodic expense declines over the life of the lease. The new standard, as amended, provides an option for entities to use the cumulative-effect transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2020. The adoption of ASC Topic 842 did not have a material impact on the Company’s consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of the principal executive officer and principal financial officer, evaluated our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of ~~June~~December 3031, 2023, our disclosure controls and procedures were ~~not~~ not effective.

The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses in our internal control over financial reporting. Currently there is no staff with knowledge of Generally Accepted Accounting Procedures on site at Howco and segregation of duties is lacking. To remediate, we have engaged outsourced accountants.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~December 3031, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3632

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

InFrom time ~~connection~~to ~~with~~time, ~~the~~we ~~2016 fiscal~~may ~~year~~be ~~merger~~involved ~~with~~in ~~Texas~~litigation ~~Wyoming~~relating ~~Drilling,~~to ~~Inc.,~~claims aarising ~~vendor~~out ~~has~~of aour ~~claim~~operations ~~for~~in ~~unpaid~~the ~~bills~~normal course of ~~approximately~~business. ~~$75~~Other than described herein,~~000~~ ~~against~~neither the Company~~. The~~, ~~Company~~nor ~~and~~ its ~~legal~~officers ~~counsel~~or ~~believe~~directors are involved in, or the ~~Company~~subject isof, ~~not~~any ~~liable~~pending ~~for~~legal proceedings or governmental actions the ~~claim~~outcome ~~pursuant~~of which, in management’s opinion, would be material to ~~its~~our ~~indemnification~~financial ~~clause~~condition inor ~~the~~results ~~merger~~of ~~agreement~~operations.

On February 6, 2018, the Company sent a letter to the previous owners of Howco Distributing Co. (“Howco”) alleging that they made certain financial misrepresentations under the terms of the Stock Purchase Agreement by which the Company acquired control of Howco during 2016. The Company claimed that the previous owners took excessive amounts of cash from the business prior to the close of the merger. On March 13, 2018 , the Company filed a lawsuit against the previous owners by issuing a summons. On April 12, 2018, the Company received the Defendants’ answer. On July 22, 2019, the Company sought and was granted a dismissal without prejudice of the lawsuit filed against the previous owners of Howco. ~~The~~A ~~Company~~company ~~had~~representative ~~previously~~and ~~made~~the ~~$3,000~~previous ~~monthly~~owners ~~payments~~have tobeen in contact. An informal oral agreement with the ~~former~~Seller ~~owner,~~was ~~however~~made ~~for~~whereby the ~~time~~Company ~~being,~~had webeen ~~have~~paying ~~decided~~the ~~to suspend~~previous ~~those~~owners ~~payments~~$3,000 ~~until~~per wemonth. ~~feel~~The ~~Bantec~~Company is inno alonger ~~better~~paying ~~position~~the previous toowner ~~resume~~$3,000 a month. A company representative ~~has~~informed ~~been~~the inprevious ~~contact~~owner ~~with~~that ~~previous~~the Company will resume the $3,000 payment as ~~owners~~soon as it is able to do so.

In ~~the suit Drone USA, Inc~~ ~~and~~connection ~~Michael~~with ~~Bannon (plaintiffs) vs~~ the ~~former~~merger ~~Chief~~in ~~Financial~~fiscal ~~Officer or CFO~~2016, ~~currently~~with ~~pending~~Texas inWyoming ~~New York State court~~Drilling, ~~the plaintiffs seek to compel the former CFO to meet his obligations under an agreement guaranteeing payments to another former executive~~Inc., ~~The~~a ~~former CFO~~vendor ~~filed~~has a ~~cross-~~claim ~~against the plaintiffs~~ for ~~past~~unpaid ~~due~~bills ~~salary. The employment agreement with the former CFO allowed salary payments to be paid in cash or stock. During the year ended September 30, 2021, the Company issued 36,821 shares~~ of ~~its~~approximately ~~common stock for the past due salary and claims that this payment moots the former CFO’s claim for past due salary. During the year ended September 30~~$75, ~~2022~~000 ~~the~~against ~~Company began~~ the ~~process to cancel the shares issued which were reclassified to equity~~Company. The former CFO filed a motion for summary judgement which was denied, then filed an appeal to that order. The appellate court reversed the lower court’s decision. On February 14, 2023, the former CFO received a judgement of $130,400 relating to compensation. On May 2, 2023, the Company and ~~the~~its ~~former~~legal ~~CFO~~counsel ~~executed an~~believe ~~agreement to settle~~ the ~~judgement~~Company ~~amount~~is ~~plus~~not ~~potential~~liable ~~obligations~~ for ~~legal fees incurred by~~ the ~~former~~claim ~~CFO~~pursuant ~~for~~to aits ~~total amount of~~indemnification ~~$90,000~~clause ~~to be paid~~ in ~~three equal installments beginning May 4, 2023, June 3, 2023 and July 3, 2023. Bantec made all three payments, and~~ the ~~matter~~merger ~~is now closed~~agreement.

On April 10, 2019, a former service provider filed a complaint with three charges with the Superior Court Judicial District of New Haven, CT seeking payment for professional services. The Company has previously recognized expenses of $218,637, which remain unpaid in accounts payable. ~~The Company has retained an attorney who is currently working to address the complaint.~~ On ~~August~~May 92, ~~2019~~2023, the Company ~~filed~~reached a ~~motion~~settlement toagreement ~~dismiss~~with ~~the~~a ~~charge~~former ofvendor ~~unjust enrichment.~~which ~~The~~had ~~judge~~a ~~granted~~pending ~~the~~legal ~~Company’s~~action ~~motion~~against tothe Company ~~dismiss.~~concerning Onservices ~~May~~rendered 2,having ~~2023,~~outstanding ~~the~~amounts ~~Company~~owed ~~reached~~of a$219,613. ~~settlement~~The ~~agreement~~Company ~~and~~ agreed to pay a total of $110,000 in total, consisting of a cash payment of $25,000 and a note payable of $85,000 (having a 3% annual interest). The Company will pay $2,472 for 36 months. ~~The Company is one payment behind and intends to catch up with the payment schedule.~~

~~During the year ended September~~On December 30, ~~2019~~2020, ~~two~~a ~~vendors~~Howco ~~(The~~vendor ~~Equity~~filed ~~Group~~a ~~and~~lawsuit ~~Toppan~~seeking ~~Vintage)~~payment ~~have~~of ~~asserted claims for~~ past due ~~amounts~~invoices oftotaling ~~approximately~~ $59276,~~000,~~430 ~~arising from~~and ~~services~~finance ~~provided.~~charges of $40,212. The Company has ~~fully~~recorded ~~recognized,~~the inliability ~~accounts~~for ~~payable~~ the ~~amounts~~invoices ~~associated~~in ~~with~~the ~~these~~normal ~~claims~~course of business. ~~The~~Management ~~Company~~at ~~has~~Howco as well as an intermediary ~~not~~consultant ~~been~~structured ina ~~contact~~repayment plan with ~~these~~this ~~entities~~vendor and other vendors as well.

On June 23, 2023, Howco entered into a settlement agreement with Crane Machinery Inc. (CMI). Howco agrees to pay $16,500 with an initial settlement of $2,000, to be followed by monthly installments of $2,900, until paid in full.Settlements

On November ~~July 26~~13, ~~2023~~2018, ~~Bantec received~~the aCompany ~~demand~~ and ~~default letter from Trillium Partners L.P. The letter references~~ a ~~document~~vendor ~~titled~~agreed ~~“Securities~~to ~~Purchase~~settle ~~Agreement” dated July 2022. In the demand letter Trillium is looking for immediate payment of~~ $~~275~~161,~~710.25.~~700 Onin ~~August~~past 4,due ~~2023,~~professional wefees ~~received~~for a ~~demand letter~~convertible ~~revising~~note in the ~~demand~~ amount of to $~~214~~90,~~563~~000.33 ~~with~~The ~~$183,259~~note inbears ~~principal and $31,304.33 in~~ interest. Aat ~~company~~5% ~~representative~~and ismatures in ~~talks~~ ~~with~~July ~~Trillium~~2019, and wehas ~~are~~a ~~looking~~fixed todiscount ~~resolve~~conversion ~~the matter amicably~~feature. InThe ~~addition,~~note ~~the~~is ~~demand~~past ~~letter included outstanding fee notes for~~due ~~Frondeur~~and ~~Partners~~remains ~~LLC.,~~unconverted aat ~~total~~September ~~of $135~~30,~~000~~ in2023 ~~principal~~ and ~~$7,903~~2022; ofhowever ~~accrued~~there ~~interest.~~is ~~According~~no todefault ~~the~~interest ~~demand~~or ~~letter,~~penalty asassociated ofwith ~~this~~the ~~day, only one note, dated October 1st, 2022, matured~~default.

37On June 23, 2023, Howco entered into a settlement agreement with Crane Machinery Inc. (CMI). Howco agreed to pay $16,500 with an initial settlement of $2,000, to be followed by five monthly installments of $2,900, until paid in full. As of December 31, 2023, the settlement amount has been fully paid.

As of December 31, 2023, the Company has received demand for payment of past due amounts for services by several consultants and service providers.

ITEM 1A. RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuance of Unregistered Securities

~~Since April 1, 2023, the Company issued the following unregistered securities:~~ None.

On April 18, 2023, we entered into an exchange agreement with Trillium, pursuant to which Trillium exchanged 224,000 shares of our Series B Preferred Stock for 224,000 shares of our Series C Preferred Stock. The Series Preferred C does not have voting or conversion rights. Section 6 outlines the mandatory redemption by the Company on a date which is earlier of: (i) December 31, 2023; and (ii) upon the occurrence of an Event of Default (i) or (ii), the Mandatory Redemption Date”).

On June 1, 2023, we issued 224,000 shares of Series C Preferred Stock to Trillium.

On June 6, 2023, we received a notice of conversion from Frondeur Partners LLC. Frondeur was looking to convert $19,017.47 into 380,349 shares of our common stock. To date the stock has not been electronically sent to Frondeur’s bank. Our transfer agent is still waiting on DWAC instructions.

Convertible Notes Issued

Between April 1, 2023 and May 1, 2023, the Company issued convertible promissory notes to Frondeur Partners LLC for a total of $30,000 in principal for services (service agreement replacing agreement with Livingston Asset Management LLC). The convertible note bears interest of 12% per annum and matures in nine months. The note issued is convertible into shares of common stock at a discount of 50% of the lowest closing bid price during the twenty trading days prior to conversion. The note has a conversion feature and is treated as stock settled debt under ASC 480 and total debt premium of $30,000 is recognized as interest expense on note issuance date.

Between April 1, 2023 and June 1, 2023, the Company issued convertible notes to a law firm, having a total principal of $12,000, six-month term to maturity and 10% annual interest and conversion terms with a fixed discount of 50% of the lowest bid price in the 30 trading days immediately preceding the notice of conversion. The notes have cross default provisions. The Company has accounts for the convertible promissory notes as stock settled debt under ASC 480 and will record debt premiums equal to the face value of the notes with a charge to interest expense. The note principal amount was charged to professional fees during the month the note was issued.

The securities were issued by the Company in reliance on the exemption from the registration requirements under section 4(a)(2) of the Securities Act of 1933 as amended, and the provisions of Regulation D thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

See ~~Notes~~Note 98 ~~and 19~~ to the Condensed Consolidated Financial Statements included in Part 1 of this Form 10-Q.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3834

ITEM 6. EXHIBITS

(d) Exhibits.

The following exhibits are filed with this Current Report on Form 10-Q

Exhibit No.		Description of Exhibit
3.1		Certificate of Designation Series C Preferred filed with the Delaware Secretary of State on April 25, 2023
10.1		Exchange Agreement between the Company and Trillium Partners LP, dated April 28, 2023
10.2		Receivable Sale Agreement between the Company and Itria Partners dated April, 28, 2023
10.3		Howco Renewal Lease Agreement dated May 2, 2023
31.1*		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document.
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

3935

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BANTEC, INC.
Dated: September 1, 2023	By:	/s/ Michael Bannon
Dated: March 13, 2024	By:	/s/ Michael Bannon
		Michael Bannon
		Chief Executive Officer (Principal Executive Officer)
		/s/ Michael Bannon
		Michael Bannon
		Chief Financial Officer (Principal Financial Officer)

4036

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